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Link for this issue: http://www.incrediblecharts.com/tradingdiary/2014-04-14-gold-markets-forex.php
 


Gold and inflation

By Colin Twiggs
April 14th, 2013 4:00 a.m. EDT (6:00 p:m AET)

These extracts from my trading diary are for educational purposes. Any advice contained therein is provided for the general information of readers and does not have regard to any particular person's investment objectives, financial situation or needs and must not be construed as advice to buy, sell, hold or otherwise deal with any securities or other investments. Accordingly, no reader should act on the basis of any information contained therein without first having consulted a suitably qualified financial advisor. Full terms and conditions can be found at Terms of Use.


Inflation expectations are falling, as suggested by a weaker gold price and treasury yields. The Dollar, however, is also weakening in response to low interest rates and should provide some support for precious metal prices.

Interest Rates and the Dollar

The yield on ten-year Treasury Notes is falling, reflecting a dovish outlook on inflation, and testing the base of the recent consolidation at 2.60 percent. Breach of primary support at 2.50 percent would signal a primary down-trend, with an immediate target of 2.00 percent*. Reversal of 13-week Twiggs Momentum below zero also warns of weakness. Recovery above 2.80 is less likely, but would suggest another advance.

10-Year Treasury Yields

* Target calculation: 2.50 - ( 3.00 - 2.50 ) = 2.00

The Dollar Index is heading for a test of primary support at 79.00. Peaks below the zero line on 13-week Twiggs Momentum suggest a primary down-trend. Breach of primary support at 79.00 would confirm, offering a target of 76.50*.

Dollar Index

* Target calculation: 79.0 - ( 81.5 - 79.0 ) = 76.5

Gold and Silver

Spot gold found support at $1280/ounce, but narrow candles for the last two weeks indicate an absence of buying pressure. Reversal below $1280 would test primary support at $1200. Completion of a 13-week Twiggs Momentum trough above zero would be a bullish sign, although breakout above $1400 remains unlikely.

Spot Gold

Silver is more bearish and failure of primary support at $19/ounce would signal continuation of the primary down-trend, offering a target of $16. Bullish divergence on 13-week Twiggs Momentum, however, points to an up-trend and breakout above $22 would confirm. Behavior of silver is likely to be mimicked by gold (and vice versa). This is a tough one to call.

Spot Silver

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Greatness means strife for nation and man alike.... We must dare to be great; and we must realize that greatness is the fruit of toil and sacrifice and high courage...

~ Theodore Roosevelt



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