Gold Strengthens But Oil Weakens
By Colin Twiggs
October 5, 2009 9:30 p.m. ET (12:30 p.m. AET)
The US Dollar Index is testing short-term resistance at 77.50. Breakout above resistance and the declining trendline would warn that the down-trend is weakening. Reversal below 76 is, however, more likely and would signal another down-swing with a target of 74.50*. The weakening dollar exerts upward pressure on gold, crude oil and general commodity prices.
* Target calculation: 76.00 - ( 77.50 - 76.00 ) = 74.50
Spot gold respected support at $985 and is now headed for a test of resistance at $1020. Upward breakout is more likely and would indicate an advance to $1100*. Retracement that respects support at $1000 would be a bullish sign. Reversal below $985 is unlikely, but would warn of a correction to test primary support at $900. In the long term, breakout above $1000 offers a target of $1300*; failure of support at $900 remains unlikely, but would signal a primary down-trend to test the November low at $700.
* Target calculations: 1000 + ( 1000 - 900 ) = 1100 and 1000 + ( 1000 - 700 ) = 1300
The Market Vectors Gold Miners Index [GDX] has yet to respond to the rising gold price, retreating from its upper trend channel. Respect of short-term resistance at $45 and reversal below $43 would be a bearish sign for gold. Divergences between gold miners and physical gold often forewarn of changes in the spot price.
Spot silver is testing the new support level at $16; respect would signal a primary advance, with a target of $19*. Failure of support is less likely, but would indicate a test of the lower trend channel and support at $14.
* Target calculation: 16 + ( 16 - 13 ) = 19
Platinum is testing short-term resistance at $1300. Penetration would signal a primary advance with a long-term target of $1500*, while breakout below the trend channel would warn that the up-trend is weakening.
* Target calculation: 1300 + ( 1300 - 1100 ) = 1500
Crude oil is edging lower, forming a weak down-trend — with a lower high at $73 followed by a new low below $67. The weakening dollar works against this, and recovery above $73 would signal a primary advance with a target of $86*. Failure of support at $65, however, would confirm a secondary correction to test primary support at $59/$60.
* Target calculation: 73 + ( 73 - 60 ) = 86
People who pride themselves on their "complexity" and deride others for being "simplistic"
should realize that the truth is often not very complicated. What gets complex is evading the truth.
~ Thomas Sowell