Gold's Long Tail
By Colin Twiggs
July 29, 2009 4:00 a.m. ET (6:00 p.m. AET)
Spot gold failed to follow-through above $960, retreating to test support at $925. The long tail, however, indicates buying support. Failure of this level would test $900, while recovery above $950 would indicate another test of $1000 — confirmed if price rises above $960. In the long term, breakout above $1000 would signal a primary advance with a target of $1100*, while failure of support at $900 would test primary support at the April low of $865.
* Target calculation: 1000 + ( 1000 - 900 ) = 1100
The Gold Miners Index [GDX] respected resistance at $40 — a bearish sign for gold. Twiggs Money Flow (13-Week) bearish divergence indicates strong selling pressure. Downward breakout from the trend channel (below $35) or TMF reversal below zero would warn of a primary trend change — and a similar outcome for the yellow metal.
Spot silver encountered similar resistance at $14.00, retreating sharply. Expect short-term support at $13.40. Failure would signal a test of support at $12.50, while respect would indicate another test of $14.00. In the longer term, failure of support at $12.50 would test primary support at $11.80; while reversal above $14.00 would indicate a healthy up-trend with a target of $16.00 — a positive sign for gold.
Crude oil retreated from resistance at $69/barrel. Respect of short-term support at $65 would be a postive sign. Breakout above $69 would test resistance at $73, while failure of $65 would test medium-term support at $60.
US inventories are declining, which should strengthen support.
The US Dollar Index is consolidating above primary support at 78.50. A narrow range would be a strong bear signal. Failure of support would signal a primary down-swing — increasing demand for gold. The target would be the lower channel border. Recovery above 81 is unlikely, but would signal a test of resistance at the March low of 83.
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