Gold and Crude Oil

Nymex Light Crude continues to test resistance at $52/barrel. A rising Trend Index signals buying pressure. Breakout above $52 would offer a target of $54. There is a broad band of resistance between $50 and $54 as illustrated on the chart below. Breakout above $54/barrel would signal another long-term advance. But long-term consolidation below $54 is as likely.

Nymex Light Crude

High gold prices historically tend to coincide with high crude prices. The chart below shows crude oil and gold prices over the last 50 years, after adjusting for inflation.

Gold and Crude prices adjusted by CPI

Present low crude prices suggest that gold will weaken.

Spot Gold rallied off support at $1260/ounce on the daily chart but encountered resistance at $1300. Consolidation between $1290 and $1275 now indicates uncertainty, while a declining Trend Index warns of selling pressure.

Spot Gold

Target 1300 + ( 1300 – 1200 ) = 1400

Dollar strength is another key influence on gold prices. After a lengthy sell-off, the Dollar Index found support at 91. Breakout above resistance at 94 would indicate this is more than just a typical bear market rally. Until then, another test of primary support at 91 remains likely; breach would warn of another major decline.

Dollar Index

Dollar rally stalls, Gold bounces

Nymex Light Crude is still testing support at $50/barrel. Follow-through above $52 would signal another advance, with a target of $54/barrel. Reversal below $49 and the rising trendline, however, would warn of trend weakness. A primary up-trend would be bearish for the Dollar and bullish for gold.

Nymex Light Crude

The Dollar Index bear market rally found resistance at 94 and is now retracing to find support. Breach of primary support at 91 would signal another major decline. Respect, on the other hand, would suggest that a base is forming.

Dollar Index

Spot Gold underwent a deep correction but is now rallying as the Dollar stalls. Political tensions remain high, both within the White House and without, and the Dollar remains in a bear market. Breakout above $1300 would reflect strong upward pressure, suggesting another test of $1350. Retreat from $1300 is not necessarily bearish. Respect of support at $1250 would suggest that a base is forming. Breach of $1250, on the other hand, would warn that the primary up-trend that started in early 2017 is weakening.

Spot Gold

Target 1300 + ( 1300 – 1200 ) = 1400

Gold hurts as Dollar rallies

Nymex Light Crude respected its new support level at $50/barrel. Follow-through above $52 would signal another advance, with a target of $54/barrel. A primary up-trend would be bearish for the Dollar and bullish for gold.

Nymex Light Crude

At present the Dollar Index continues its bear market rally, testing resistance at 94. Breakout is fairly likely but expect another correction to test primary support at 91. After all, this is a bear market.

Dollar Index

Spot Gold is undergoing a deep correction in response to the Dollar rally. But political tensions are high and the Dollar is in a bear market. Respect of the rising trendline (around $1250) would signal another primary advance. Follow-through above $1350 would confirm.

Spot Gold

Target 1300 + ( 1300 – 1200 ) = 1400

Gold corrects as Dollar rallies

The Dollar Index continues to test resistance at its former primary support level of 93. This is a bear market rally. Rising crude prices are bearish for the Dollar and respect of resistance would confirm another decline.

Dollar Index

*Target: 93 – ( 103 – 93 ) = 83

Nymex Light Crude has advanced since breaking resistance at $50/barrel. Target for the primary advance is $54/barrel. Retracement to test the new support level remains likely but respect would confirm the up-trend.

Nymex Light Crude

Spot Gold continues in a primary up-trend. Political tensions are high and a weaker Dollar would drive another gold advance. A correction that respects the rising trendline would signal a primary advance. Follow-through above $1350 would confirm. A Trend Index trough above zero, indicating buying pressure, would strengthen the bull signal.

Spot Gold

Target 1300 + ( 1300 – 1200 ) = 1400

Gold finds support as crude oil advances

Nymex Light Crude broke through resistance at $50/barrel, signaling a primary advance with a target of $54/barrel. Expect retracement to test the new support level but respect is likely and would confirm the up-trend.

Nymex Light Crude

The Dollar Index is retracing to test its new resistance level at 93. Rising crude prices are bearish for the Dollar and respect of resistance is likely, which would confirm another decline. Twiggs Trend Index has started to rise, however, and recovery above 93, while less likely, would warn of a bear market rally.

Dollar Index

*Target: 93 – ( 103 – 93 ) = 83

Spot Gold found short-term support at $1290/ounce, overshooting the $1300 target. Political tensions are high and a weaker Dollar would drive another gold advance. Recovery of gold above its descending trendline and Twiggs Trend Index above zero would strengthen the signal. But breach of $1290 is as likely and would warn of a test of $1250.

Spot Gold

Target 1300 + ( 1300 – 1200 ) = 1400

Gold looks for support as Dollar retraces

Spot Gold is retracing to test support after a strong advance to $1350/ounce. Respect of the rising trendline would signal another strong advance but a stronger correction, respecting support at $1300 is more likely. The immediate target for another advance is the 2016 high of $1375. Rising Twiggs Trend Index indicates buying pressure. Breach of support at $1300 is unlikely at present.

Spot Gold

Target 1300 + ( 1300 – 1200 ) = 1400

Gold is supported by a weakening Dollar, with the Dollar Index retracing to test its new resistance level after breaking primary support at 92. Respect of resistance is likely and would confirm the long-term target of 83*.

Dollar Index

*Target: 93 – ( 103 – 93 ) = 83

Rising crude oil prices would also be bullish for gold, increasing inflationary pressure and also easing pressure on oil-producing states to sell off gold reserves accumulated when oil prices were high. Nymex Light Crude is testing resistance at $50/barrel. Upward breakout would suggest that the recent down-trend has ended — a bullish sign for gold.

Nymex Light Crude

Dollar breaks support, Gold rises

The Dollar Index broke support at 92. Retracement may test the new resistance level but respect is likely would confirm the long-term target of 83*.

Dollar Index

*Target: 93 – ( 103 – 93 ) = 83

The Dollar is also falling fast against the Chinese Yuan. Breach of primary support at 6.60 and decline of the Trend Index below zero both warn of a primary down-trend.

USDCNY

A weak Dollar and rising geo-political tensions (North Korea) are bullish for gold. The immediate target is the 2016 high of $1375. Rising Twiggs Trend Index confirms buying pressure. Retracement that respects support at $1300 would strengthen the bull signal.

Spot Gold

Target 1300 + ( 1300 – 1200 ) = 1400

Another major influence on gold is crude oil prices. So far, crude has respected resistance at $50 despite the weaker Dollar. Softer crude prices would be bearish for gold.

Nymex Light Crude

Gold surges above $1300

A weak Dollar and rising geo-political tensions over North Korea are bullish for gold which surged through resistance at $1300/ounce. Target for the advance is $1400*. Rising Twiggs Trend Index confirms buying pressure. Reversal below $1250 is now most unlikely but would warn of another test of primary support at $1200.

Spot Gold

Target 1300 + ( 1300 – 1200 ) = 1400

The Dollar Index continues to test support between 92 and 93.

Dollar Index

*Target: 93 – ( 103 – 93 ) = 83

But the Dollar is falling fast against China’s Yuan. Breach of primary support at 6.60 and decline of the Trend Index below zero both signal a primary down-trend.

USDCNY

*Target: 93 – ( 103 – 93 ) = 83

Another major influence on gold is crude oil prices. Softer crude prices are bearish for gold but the latest decline is finding more support than the preceding three. Recovery above the downward channel and resistance at $50/barrel would signal a fresh advance.

Nymex Light Crude

Dollar fall buoys Gold

The Dollar Index ended weakly, breaking long-term support at 93. Declining Twiggs Trend Index warns of sustained selling pressure. Follow-through below 92 would confirm another primary decline, with a long-term target between 83 and 84*.

Dollar Index

*Target: 93 – ( 103 – 93 ) = 83

A weak Dollar is bullish for Gold. Spot gold is consolidating below resistance at $1300/ounce. Rising Twiggs Trend Index signals buying pressure. Upward breakout above $1300 is likely and would signal another primary advance, with a target of $1400*. Reversal below $1250 is unlikely but would warn of another test of primary support at $1200.

Spot Gold

Target 1300 + ( 1300 – 1200 ) = 1400

Always the wild card, crude is consolidating below resistance at $50/barrel. The weak Dollar is also bullish for crude oil prices. Declining Twiggs Trend Index warns of long-term selling pressure. That favors another test of support at $40/barrel, continuing the primary down-trend. But breakout above $50 and all bets are off.

Nymex Light Crude

Federal Reserve Bank of San Francisco | Forecasting China’s Role in World Oil Demand

From Deepa D. Datta and Robert J. Vigfusson

Although China’s growth has slowed recently, the country’s demand for oil could be entering a period of faster growth that could result in substantially higher oil prices. Because Americans buy and sell oil and petroleum products in the global market, global demand prospects influence the profitability of U.S. oil producers and the costs paid by U.S. consumers. Analysis based on the global relationship between economic development and oil demand illustrates the prospects for Chinese oil demand growth and the resulting opportunities and challenges for U.S. producers and consumers.

The oil market has seen two major surprises in the 21st century. The most recent was the shale revolution, which dramatically increased the amount of oil supplied by North American producers and contributed to the oil price collapse of 2014.

Before the shale revolution, however, there was rapid demand growth from emerging market economies. Propelled by robust GDP growth, China’s demand for oil nearly doubled within a decade, and other emerging markets experienced similar growth. As a consequence, oil prices soared in 2007 and 2008, and advanced economies, including the United States, cut their consumption.

Most studies assume that shifts in global demand over the next decade will be gradual, with oil prices continuing to be driven primarily by supply. The surprising resilience of U.S. shale oil production both to lower oil prices and to coordinated actions by OPEC countries suggests that any oil price recovery will remain subdued (Energy Information Administration 2016). However, one potentially important source of future rapid growth in demand and thus in prices comes from emerging market economies, especially China. Given that Chinese demand helped boost world oil prices in the early 2000s, we consider the implications of a similar surprise in the coming years.

China’s future demand for oil will depend on both its economic growth and its energy choices. A high level of growth combined with energy-intensive choices could result in Chinese oil demand doubling by 2025. Even in a scenario with more moderate growth and less energy-intensive choices, China’s oil demand would still grow by over 30% by 2025. To the extent that U.S. and foreign oil producers do not anticipate this demand increase, prices would have to rise, perhaps dramatically.

Source: Federal Reserve Bank of San Francisco | Forecasting China’s Role in World Oil Demand

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.