Gold benefits from Dollar fall

The Dollar Index continues its downward path, having breached support at 100. Follow-through below the rising trendline at 99 would warn of a test of primary support at 93.

Dollar Index

Spot Gold has benefited. Currently testing resistance at $1250/ounce, narrow consolidation is a bullish sign. Follow-through above $1260 would confirm a target of $1300. Crossover of 13-week Momentum to above zero is also bullish, suggesting a primary up-trend.

Spot Gold

Gold rallies as Dollar falls

The Dollar Index rally is falling despite rising interest rates. Chinese sell-off of foreign reserves to support the Yuan may be a factor.

Dollar Index

Spot Gold rallied off support at $1200/ounce. Recovery above $1250 would confirm an up-trend, with the next target at $1300.

Spot Gold

Gold bears grow as Fed hints at rate hike

The Fed is expected to hike interest rates next week. 10-year Treasury yields broke resistance at 2.5 percent, signaling an advance to the 2013/2014 high of 3.0 percent. Breakout above 3.0 percent is still a way off but would complete a large double bottom signaling the end of the 30-year secular bull market in bonds. Rising interest rates are bearish for gold.

10-year Treasury Yields

The Dollar Index rally continues to meet resistance, with tall shadows on the last four weekly candles signaling selling pressure. Rising interest rates could strengthen the advance, with bearish consequences for gold, but Chinese sell-off of foreign reserves (to support the Yuan) is working against this.

Dollar Index

Spot Gold is testing support at $1200/ounce. Recovery above $1250 would indicate that the recent down-trend has ended. But breach of support is more likely and would warn of another test of long-term support at $1050/ounce.

Spot Gold

Gold hesitates as Fed hints at rate hike

From WSJ:

Federal Reserve Chairwoman Janet Yellen signaled the central bank is likely to raise short-term interest rates at its March meeting and suggested more increases are likely this year if the economy performs as expected.

“At our meeting later this month, the [Federal Open Market] Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate,” Ms. Yellen said in remarks prepared for delivery at the Executives’ Club of Chicago.

The Dollar Index rally continues to meet resistance, with tall shadows on the last three weekly candles signaling selling pressure. Rising interest rates would strengthen the advance, with bearish consequences for gold.

Dollar Index

Spot Gold hesitated at $1250/ounce. Rising interest rates also increase the opportunity cost of holding precious metals. Reversal below $1200 would warn of another decline but recovery above $1250 remains more likely and would signal an advance to $1300.

Spot Gold

Gold breaks through $1250

10-Year Treasury Yields are testing support at 2.30%. Expect this to hold. Breach of the rising trendline would warn of a correction but this seems unlikely with the Fed intent on normalizing interest rates. Breakout above 2.50% would offer a target of 3.0%.

10-Year Treasury Yields

The Dollar Index rally remains muted since finding support at 100. Rising long-term yields would fuel the advance, with bearish consequences for gold.

Dollar Index

China’s Yuan is consolidating. Resistance on USDCNY at 7 Yuan is likely to be tested soon.

USDCNY

The PBOC has been burning through its foreign reserves to slow the rate of depreciation against the Dollar, to create a soft landing. A sharp fall would destabilize global financial markets and fuel capital flight from China.

China Foreign Reserves

Spot Gold broke through resistance at $1250, signaling an advance to $1300.

Spot Gold

Interest rates bearish for gold

10-Year Treasury Yields are consolidating below resistance at 2.50%. Long tails suggest medium-term buying pressure. Breakout is likely and would offer a target of 3.0%.

10-Year Treasury Yields

The Dollar Index rally has so far been muted since finding support at 100. But rising long-term yields are likely to fuel the advance, with bearish consequences for gold.

Dollar Index

Spot Gold is consolidating below $1250/ounce. Reversal below $1200 would warn of another decline. Breach of primary support at $1130 would confirm. Arguments for a further advance appear weak, but breakout above $1250 would signal an advance to $1300.

Spot Gold

Gold rallies but Dollar bottoms

Rising uncertainty has fueled an extended Gold rally. Respect of support at $1200/ounce suggests another advance, this time to $1300, but a lot will depend on the Dollar.

Spot Gold

The Dollar Index, however, found support at 100. Respect would suggest another advance and a primary up-trend. With bearish consequences for gold.

Dollar Index

Gold rises as Dollar falls

The Dollar Index has been falling since the start of the year. Respect of support at 100, however, would signal a primary up-trend.

Dollar Index

Gold advanced as the Dollar fell. Support at $1200/ounce suggests another advance, this time to $1300, but a lot will depend on the Dollar.

Spot Gold

Gold falls as the Fed hikes rates

10-Year Treasury yields jumped above resistance at 2.5 percent after the latest Fed rate hike. Penetration of the long-term descending trendline warns that the secular down-trend is ending. Expect a test of the 2013/2014 high at 3.0 percent. Breakout would confirm the long-term down-trend has ended.

10-Year Treasury Yields

The Dollar Index respected its new support level at 100, signaling an advance to 107*.

US Dollar Index

* Target medium-term: 100 + ( 100 – 93 ) = 107

Gold continued its descent in response to rising interest rates and a stronger Dollar. Steps by the Chinese government to limit private gold purchases, in an attempt to support the Yuan, will also impact on demand. Target for the decline is unchanged at the December 2015 low of $1050/ounce. Retracement that respects the resistance level at $1200 would further strengthen the bear signal.

Spot Gold

Gold declines as interest rates rise

The Fed is expected to hike interest rates in December. Long-term interest rates are rising in anticipation of further rate hikes in 2017. 10-Year Treasury yields have penetrated their 10-year descending trendline, warning that the secular down-trend is ending. Breakout above 2.50 percent would strengthen the signal, while follow-through above the 2013/2014 high of 3.0 percent would confirm.

10-Year Treasury Yields

The Dollar Index successfully tested its new support level at 100. Target for the advance is 107*.

US Dollar Index

* Target medium-term: 100 + ( 100 – 93 ) = 107

With interest rates rising and the Dollar strengthening, demand for Gold is shrinking. Steps by the Chinese government to limit private gold purchases, part of their program to support the Yuan by slowing capital flight, will also impact on demand. Target for the decline is unchanged at the December 2015 low of $1050/ounce. Retracement that respects the resistance level at $1200 would strengthen the bear signal.

Spot Gold

Gold and Dollar pause

The Dollar Index paused in its advance and is likely to retrace to test the new support level at 100. Target for the advance is 107*.

US Dollar Index

* Target medium-term: 100 + ( 100 – 93 ) = 107

Gold paused in its primary decline, in response. The target is unchanged at the December 2015 low of $1050/ounce. Retracement that respects the resistance level at $1200 would strengthen the bear signal.

Spot Gold

Gold falls as Dollar climbs

Interest rates are surging as the market anticipates rising inflation under a Trump presidency. 10-Year Treasury yields are testing resistance at 2.50. Breakout is likely and would signal a test of resistance at 3.0 percent. Penetration of 3.0 percent would warn that the 30-year secular down-trend in Treasury and bond yields is coming to an end.

10-Year Treasury Yields

The Dollar strengthened in response to rising interest rates, with the Dollar Index breaking resistance at 100 to signal a primary advance with a target of 107*.

US Dollar Index

* Target medium-term: 100 + ( 100 – 93 ) = 107

Gold breached primary support at $1200 in response, signaling a primary decline with a target of the December 2015 low of $1050/ounce.

Spot Gold

In the long-term, higher inflation and a weakening Yuan could both fuel demand for gold as a store of value. But the medium-term outlook is bearish.

Gold strengthens as Dollar weakens

Long-term interest rates continue their decline, with 10-year Treasury yields testing support at 1.65 to 1.70 percent. Breach would signal a test of the all-time (July 2012) low of 1.40 percent.

10-year Treasury yields

Gold rallied in response, breaking initial resistance at $1250/ounce to signal a test of $1300.

Gold

The Chinese appear to have resumed selling foreign reserves to support the Yuan, with USDCNY running into resistance at 6.60. PBOC sale of reserves would weaken the Dollar, boosting demand for Gold. Failure to support the Yuan is unlikely, but would increase safe haven demand for Gold from Chinese investors.

USDCNY

The Dollar Index, representing predominantly the Euro and Yen crosses, fell sharply. Breach of support at 93 would confirm the primary down-trend earlier signaled by 13-week Momentum below zero.

Dollar Index

The Australian All Ordinaries Gold Index broke through 4500 to signal another advance, with the weakening Australian Dollar adding further impetus. Gaps between trough lows (orange line) and preceding highs (brown line) indicate strong buying pressure.

All Ordinaries Gold Index

Disclosure: Our Australian managed portfolios are invested in gold stocks.

Gold tanked? Not yet!

Gold broke below its recent flag formation, warning of a test of support at $1200/ounce.

Gold

Selling is driven by expectations of a Fed interest rate hike in June …..and recent Chinese stimulus which postponed Yuan devaluation against the Dollar. But expectations of a rate hike are causing a sell-off of the Chinese Yuan, with the USDCNY strengthening over the last few weeks.

USDCNY

…Which in turn will cause the Chinese to sell foreign reserves to support the Dollar peg (…..else devalue which would panic investors and cause a downward spiral). Sale of Dollar reserves by China would drive the Dollar lower.

Dollar Index

…and Gold higher. I remain bullish as long as support at $1200/ounce holds.

Disclosure: Our Australian managed portfolios are invested in gold stocks.

Greenback finds support

The US Dollar Index rallied off long-term support at 93 but this looks more a pause in the primary down-trend, signaled by decline of 13-week Momentum below zero, than a reversal.

US Dollar Index

Explanation for the Dollar rally is evident on the chart of China’s foreign reserves: a pause in the sharp decline of the last 2 years. China has embarked on another massive stimulus program in an attempt to shock their economy out of its present slump.

China: Foreign Reserves

But this hair of the dog remedy is unlikely to solve their problems, merely postpone the inevitable reckoning. The Yuan is once again weakening against the Dollar and decline in China’s reserves, and the US Dollar as a consequence, is likely to continue.

USD: Chinese Yuan

Gold rallies as crude finds support

Crude finds support at $30/barrel, iron ore rallies, the Dollar strengthens, long-term interest rates fall and all seems right with the world. But is it? Deflationary pressures in Europe are rising. China cut bank reserve requirements to stimulate lending. And long-term interest rates would be rising, not falling, if confidence is restored.

Crude

Nymex WTI Light Crude futures (June 2016) found support at $30 per barrel. Expect a test of $40/barrel. But the primary trend is down and respect of the descending trendline is likely, which would warn of another decline.

Nymex WTI Light Crude June 2016 Futures

* Target calculation: 30 – ( 40 – 30 ) = 20

Long-term interest rates remain weak, with 10-year Treasury yields testing primary support at 1.5/1.65 percent. The flight from stocks is driving up Treasuries (and yields lower), overwhelming sales by China (to shore up the Yuan). Declining 13-week Twiggs Momentum warns of further weakness.

10-year Treasury Yields

The Dollar Index rallied over the past two weeks but further PBOC selling is expected to reinforce resistance at 100. Reversal of 13-week Twiggs Momentum below zero would warn of a primary down-trend.

Dollar Index

Gold has benefited from the uncertainty, with consolidation above $1200 suggesting another advance. Breakout above $1250 would offer a target of $1300*.

Spot Gold

* Target calculation: 1200 + ( 1200 – 1100 ) = 1300

The monthly chart, however, reflects a more precarious position. Momentum has clearly shifted, with breach of the descending trendline and a sharp rise on the 13-week indicator. But there is no higher trough confirming the trend change. So pick your entry points carefully and maintain tight stops. This could still go either way.

Spot Gold

Gold: PBOC makes its move

China’s PBOC made its move against the hedge funds on Monday, while many hedge fund managers were enjoying a long weekend in the Hamptons. With more than $3 Trillion of foreign reserves, this is a fight that the PBOC is likely to win, provided it stands firm. Hedge funds betting on a collapse of the Yuan can leverage their positions, but that makes them vulnerable to margin calls. Driving the Yuan below 6.50 to the Dollar may force some to cover their shorts, which would further strengthen the beleaguered currency.

USDCNY

China’s sell-off of foreign reserves has caused the Dollar to fall, in the midst of a flight to safety. Retracement that respects resistance at 97.50/98.00 would indicate a decline to test primary support at 93.00. Decline of 13-week Twiggs Momentum below zero warns of a primary down-trend.

Dollar Index

Flight to safety has spiked demand for Gold. Expect retracement to test support between $1150 and $1200/ounce. But respect of either level would confirm a trend reversal (after recovery above $1200 completes a higher trough).

Spot Gold

Batten down the hatches

Batten down the hatches, the storm is here.

Nymex WTI Light Crude futures (March 2016) are testing support at $30 per barrel. There is no indication that this is the bottom and breach of $30 would be likely to test $20 per barrel.

Nymex WTI Light Crude March 2016 Futures

* Target calculation: 30 – ( 40 – 30 ) = 20

Long-term interest rates are falling, with 10-year Treasury yields headed for another test of primary support at 1.5 percent. Breach of 1.7 percent would confirm. The flight from stocks is driving up Treasuries (and yields lower).

10-year Treasury Yields

Flight to safety is (normally) synonymous with a strong Dollar, so the weakening Dollar Index is a surprise.

Dollar Index

China must be selling off Dollar reserves to support the Yuan and restore confidence.

USDCNY

Too late, I’m afraid. That horse has bolted. Loss of confidence in the Yuan is driving demand for gold, with the spot metal rallying to $1200 per ounce. Resistance at the former support level makes retracement likely, but a trough that respects $1100 or narrow consolidation below $1200 would suggest reversal (to an up-trend). Breach of $1200 would offer a target of $1300*.

Spot Gold

* Target calculation: 1200 + ( 1200 – 1100 ) = 1300

After forming a lower peak at 18000, Dow Jones Industrial Average is testing primary support at 16000. 13-Week Twiggs Momentum peak at zero warns of a primary down-trend. Breach of support would offer a target of 14000*.

Dow Jones Industrial Average

* Target calculation: 16000 – ( 18000 – 16000 ) = 14000

The S&P 500 displays a similar pattern, testing primary support at 1850, with a 13-week Twiggs Momentum peak at zero. Breach of support would offer a target of 1500*.

S&P 500 Index

* Target calculation: 1850 – ( 2150 – 1850 ) = 1550

A monthly chart shows VIX rising for another test of 30. Oscillation between 20 and 30 flags elevated market risk.

CBOE Volatility Index

Australia’s ASX 200 retreated below primary support at 5000, signaling a primary down-trend. A 13-week Twiggs peak below zero already warns of a decline. Today’s close at 4832 confirms, offering a short-term target of 4600* and a long-term target of 4000*.

ASX 200 Index

* Target calculation: 4850 – ( 5050 – 4850 ) = 4650; 5000 – ( 6000 – 5000 ) = 4000

Investors who plan to hold stocks through a possible down-turn should stop watching daily prices and listening to news reports. It will only weaken your resolve. I am comfortable with holding stocks with strong dividend streams, but wary of holding growth stocks as they normally suffer the biggest losses.

For traders this is a time of dangerous opportunity. Either shorting sectors likely to be worst hit or waiting for opportunities to buy gold stocks.

Northern Star (NST)

Only when the tide goes out do you discover who’s been swimming naked.

~ Warren Buffett