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Gold and commodities fall while Dollar and bond yields rise

By Colin Twiggs
May 16th, 2013 4:00 a.m. ET (6:00 p:m AET)

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Gold broke the rising trendline and support at $1440/$1450, indicating another test of primary support at $1320. Target of $1200* for the decline would be confirmed by a breach of primary support.

Gold

* Target calculation: 1350 - ( 1500 - 1350 ) = 1200

Treasury Yields

Ten-year treasury yields broke resistance at 1.80% and are headed for a test of 2.00/2.05%. Breach of that level would signal a primary up-trend, but the thirty-year secular bear trend (in yields) remains downward and would only be reversed by a rise above 4.00%. Respect of resistance at 2.05% remains likely and would indicate another down-swing to test primary support at 1.60%. A weak inflation outlook, as indicated by falling gold prices, would decrease demand for stocks (as an inflation hedge) and increase demand for bonds.

Ten-year Treasury Yields

Dollar Index

The Dollar is strengthening, with the Dollar Index testing resistance at 84. Breakout would signal a test of long-term resistance at 89/90*.

Dollar Index

* Target calculation: 84 + ( 84 - 79 ) = 89

Crude Oil

Brent Crude respected resistance at $106/barrel, indicating a down-swing to $92*. Nymex WTI respected resistance at $98 and is likely to re-test resistance at $85/barrel. A classic pair trade, the spread between the two is likely to narrow as the European economy under-performs.

Crude Oil

Commodities

Commodity prices continue to fall, with the Dow Jones/UBS Commodity Index headed for primary support at 125/126. The major driver of commodity prices is China and reversal of the current down-trend, on both indices, appears some way off despite a US recovery.

Dow Jones-UBS Commodity Index


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~ Margaret Thatcher, Statecraft: Strategies for a Changing World (2002)

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