Gold encounters resistance at $1300

The Dollar Index continues to test primary support between 92 and 93. Consolidation or a weak rally is likely but Twiggs Trend Index warns of long-term selling pressure. Breach of support would signal another primary decline, offering a long-term target between 83 and 84* — a bullish sign for gold.

Dollar Index

*Target: 93 – ( 103 – 93 ) = 83

Crude continues to test resistance at $50/barrel. Breakout would be bullish for gold but respect is more likely and would test primary support at $40/barrel.

Nymex Light Crude

Gold encountered strong resistance at $1300/ounce. Expect retracement to test support at $1270 and $1250. Reversal below $1250 remains unlikely.

Spot Gold

Target 1300 + ( 1300 – 1200 ) = 1400

Gold & Silver advance

The Dollar Index is testing primary support between 92 and 93. Expect consolidation or a weak rally but Twiggs Trend Index warns of sustained selling pressure. Breach of support would signal another primary decline, offering a long-term target between 83 and 84* — a bullish sign for gold.

Dollar Index

*Target: 93 – ( 103 – 93 ) = 83

Crude respected resistance at $50/barrel, suggesting another test of support at $40/barrel, continuing the primary down-trend. Twiggs Trend Index again warns of selling pressure. Breakout above $50 is now unlikely.

Nymex Light Crude

Gold is headed for a test of resistance at $1300/ounce, while a rising Twiggs Trend Index signals buying pressure. Breakout above $1300 is likely and would indicate another primary advance, with a target of $1400*. Reversal below $1250 is now unlikely but would warn of another test of primary support at $1200.

Spot Gold

Target 1300 + ( 1300 – 1200 ) = 1400

Silver broke through resistance at $17/ounce, a bullish sign for gold. Retracement that respects the new support level would strengthen the bull signal, indicating a test of the April high at 18.50.

Spot Silver

Gold responds to crude strength and Dollar support

The Dollar Index is testing primary support between 92 and 93. Breach of support would offer a long-term target between 83 and 84* — a bullish sign for gold.

Dollar Index

*Target: 93 – ( 103 – 93 ) = 83

Crude continues to test resistance at $50/barrel. Respect would indicate another test of the lower trend channel, around $40/barrel, continuing the primary down-trend. Follow-through above $50 would suggest that a bottom has formed and the next correction is likely to be higher than the last low at $42.

Nymex Light Crude

Gold retraced to test support at $1250/ounce — in line with crude strength and Dollar support. Respect of support is more likely and would indicate another test of $1300. Reversal below $1250 is unlikely but would warn of another test of primary support at $1200.

Spot Gold

Silver also retraced and is likely to test primary support at $15.50. Rising Twiggs Trend Index suggests that another test of resistance at $17 remains likely. Breakout above $17 would be bullish for gold.

Spot Silver

Gold rallies as Crude rises and Dollar falls

The Dollar Index is testing primary support between 92 and 93; bullish for gold. Breach of support would offer a long-term target between 83 and 84*.

Dollar Index

*Target: 93 – ( 103 – 93 ) = 83

Crude rallied strongly this week, with Nymex light crude testing its upper trend channel at $50/barrel. Respect would indicate another test of the lower trend channel, around $40/barrel, continuing the primary down-trend. Follow-through above $50 would suggest that a bottom has formed and the next correction is unlikely to reach the last low of $42.

Nymex Light Crude

Gold followed through above $1260 after a brief retracement, indicating another test of $1300. Reversal below $1250 is unlikely but would be a bearish sign, warning of another test of primary support.

Spot Gold

The accompanying rally in Silver is testing the descending trendline at $17/ounce. Penetration would suggest that a bottom is forming and the primary down-trend is near an end; a bullish sign for gold.

Spot Silver

Opec and the oil barons face a slow death by electrification

From Ambrose Evans-Pritchard:

Tesla’s mass-market Model 3 will be launched this Friday at a starting price of $US35,000 ($43,725) and a battery range of 215 miles (346 kilometres) , with a target of 1 million sales annually within three years….

The argument at the big global banks has shifted from whether peak oil demand will occur to how soon it will occur. Goldman Sachs said this week that it could hit by 2024 in “an extreme case”. That is not extreme enough for Tony Seba from Stanford University and RethinkX.

…Professor Seba thinks EVs will reach cost parity within five years as prices fall below $US20,000 (versus $US24,000 for the average oil-based car today). Thereafter they will sweep the field on cost alone. With far fewer moving parts and a potential lifespan of half a million miles, they will render the combustion engine obsolete.

Source: Opec and the oil barons face a slow death by electrification

Gold rallies as Dollar plunges

The Dollar Index is in a primary down-trend. Its decline accelerated in the last week, headed for the next level of primary support between 92 and 93, which is bullish for gold.

Dollar Index

Falling crude prices, however, have a bearish influence on gold. Nymex light crude recently staged a rally but ran into resistance at $47.50/barrel. Expect another decline to test the lower trend channel at $42, continuing the primary down-trend.

Nymex Light Crude

Gold broke resistance at $1250/ounce. Follow-through above $1260 would signal another test of resistance at $1300. Reversal below $1250, on the other hand, would be a bearish sign.

Spot Gold

Silver rallied off primary support at $15.50/ounce but only a break above the descending trendline (at $17/ounce) would flag a reversal in the primary down-trend.

Spot Silver

Gold: There’s life in the old girl yet

The Dollar Index is in a primary down-trend. Breach of support at 95.50 signals another decline. The long-term target is the 2016 low between 92 and 93.

Dollar Index

A weakening Dollar and geo-political uncertainty should fuel demand for gold, but gold and silver have both been testing support in recent weeks rather than advancing strongly as expected.

The best explanation I have for this is falling crude oil prices. The long-term chart below shows gold and crude oil prices adjusted for inflation (CPI). Whenever there is a strong surge in crude oil prices, gold tends to follow. Rising crude prices and higher consequent inflation reduce confidence in the Dollar and major oil producers tend to buy more gold with their newfound surplus, as a store of value.

Gold & Crude Oil prices adjusted for inflation

The opposite occurs if oil prices fall and those same oil producers are forced to sell gold reserves in order to fund an unexpected deficit.

At present crude prices are undergoing a bear market rally, having recovered above resistance at $45/barrel, but the primary trend is down. Gold has followed suit, recovering above support at $1215/ounce. Penetration of the declining trendline suggests a test of resistance at $1250.

Spot Gold

But crude prices remain weak and (gold) respect of $1250 would indicate another test of primary support at $1200.

Crude breaks support at $45 / New Twiggs Trend Index

Nymex Light Crude retreated below support at $45/barrel, confirming a primary down-trend. Breach of $40 would strengthen the bear signal, offering a target of the 2008/2016 lows between $25 and $30. Declining Twiggs Trend Index, with a peak below zero, warns of a primary down-trend. Follow-through below the last trough at -1.0% would strengthen the warning.

Nymex Light Crude

Twiggs Trend Index is a new proprietary indicator that will be released with the next upgrade of Incredible Charts. The indicator combines Market Sentiment (as in Twiggs Money Flow) over Volatility rather than Volume (in Twiggs Money Flow). Signals are read in a similar way to Twiggs Money Flow but it just gives readers a slightly different perspective on the market while avoiding some of the occasional distortions caused by massive volume spikes that affect Twiggs Money Flow. I will publish more detail in a separate newsletter next week.

Gold-Oil ratio warns of further easing

I don’t attach much significance to the Gold-Oil ratio on its own but it’s back in overbought territory, above 25.

Spot Gold/Light Crude

The chart below — plotting inflation-adjusted prices (over CPI) — far better depicts the relationship between gold and crude oil. Each major spike in crude prices over the last 50 years has been followed by a rising gold price.

Spot Gold/Brent Crude

Falling crude prices are likely to weaken demand for gold over the next few years, both through lower inflation and declining foreign reserves of major oil producing nations.

Gold finds support at $1250

The Dollar Index continues to test support at 96.50. The primary trend is down and breach of support is likely, signaling a decline to test the 2016 low at 92/93.

Dollar Index

Spot Gold found support at $1250. A weaker Dollar and rising political uncertainty both favor an up-trend but rising interest rates are expected to weaken demand. Respect of support at $1250 would confirm the up-trend, while breach of $1200 would warn of another decline.

Spot Gold

Crude headed for $30 if OPEC fails to deepen cuts

Crude could fall to $30/barrel next year — and stay there for two years — according to Fereidun Fesharaki, chairman of consultants FGE.

Nymex Light Crude breached support at $45/barrel, signaling a primary decline. Expect further support at $40 but penetration of this would target the 2008 low at $30 and the 2016 low at $25 a barrel.

Nymex Light Crude

Crude tests support at $45/barrel

Nymex Light Crude is testing support at $45/barrel. Breach would offer an immediate target of $40. Follow-through below $40 would signal another test of the 2008/2016 lows at $30.

Nymex Light Crude

The chart below plots long-term crude prices adjusted for inflation. Recent falls show real crude prices returning to their previous trading range (0.1 to 0.2) before the 2004 to 2015 “China boom”.

Nymex Light Crude/CPI

The 2004 to 2015 surge in crude prices is very likely a major cause of low global growth over the last decade. Return to the previous trading range would be a bullish sign for the global economy.

OPEC extends output cuts but “caught in a pincer”

From Stanley Reed at The Age:

The Organisation of the Petroleum Exporting Countries extended oil production cuts through March 2018, Khalid A. al-Falih, the Saudi energy minister, said in Vienna overnight. The move follows a decision this month by Saudi Arabia and Russia to do so.

The earlier announcement helped lift prices from a low of $US46. But on Thursday, prices shed more than 4 per cent with more than a billion barrels traded….

“Opec is being caught in a pincer movement of technology and policy that will, over time, erode oil use,” said Bill Farren-Price, chief executive of Petroleum Policy Intelligence, an advisory firm for hedge funds and other investors. “This meeting is more about forestalling an oil price collapse than driving prices higher.”

Read more at: OPEC agrees to extend output cuts through March 2018

Crude falls are likely

Nymex Light Crude broke support at $47/barrel, signaling a down-trend. Follow-through below $45 would confirm.

Nymex Light Crude

Lars Christensen shows that projected oil demand is closely linked to monetary conditions, with a down-turn in oil prices whenever the Fed announces further rate hikes. At present both the PBOC and the Fed are adopting a restrictive stance which should be bearish for crude oil.

Oil price fall is caused by tighter monetary conditions | Lars Christensen

Lars Christensen is one of the founding members of the Market Monetarism school of economic thought, having coined the term himself. Market Monetarists advocate that central banks target nominal GDP, instead of inflation, in order to achieve more responsive monetary policy and more stable economic growth.

Crude falls below $50

June Light Crude fell sharply last week, ending below $50/barrel in response to rising US inventories.

June Light Crude

Respect of the lower trend channel would suggest that this is a secondary movement and the primary up-trend is intact. Breach of the lower channel would warn that the primary trend is weakening.

Crude stalls

December Light Crude retreated below support at $50/barrel, suggesting another test of primary support at $42/barrel.

December Light Crude

Respect of primary support would suggest further ranging between $42 and $52/barrel. Breach of support, which seemed so unlikely only two weeks ago, is now a possibility and would warn of another test of the January trough at $35/barrel.

Crude: Another advance likely

Nymex December Light Crude is consolidating above the new support level at $50/barrel. Respect is likely and would confirm the primary up-trend. Target for an advance is $56/barrel*.

December Light Crude

* Target: 50 + ( 50 – 44 ) = 56