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Dollar falls and gold rises

By Colin Twiggs
October 24th, 2013 2:30 a.m. EDT (5:30 p:m AEDT)

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.



The Dollar Index respected resistance at 80.50, breaking below 80 to confirm a primary decline. Breach of the 2012 lows at 79 would confirm a long-term target of 76.50*. The falling dollar is boosting gold prices.

Dollar Index

* Target calculation: 80.5 - ( 84.5 - 80.5 ) = 76.5

The yield on ten-year Treasury Notes broke through support at 2.60 percent, heading for primary support at 2.40 percent. Falling yields depress the dollar while lowering the opportunity cost of holding precious metals, exerting upward pressure on gold. Respect of primary support, however, would warn of an advance to 3.60 percent.

10-Year Treasury Yields

* Target calculation: 3.00 + ( 3.00 - 2.40 ) = 3.60

Gold

Spot gold recovered above $1300 and its descending trendline on the daily chart, suggesting another primary advance. Breakout above $1350 would confirm, offering a target of 1600*. Respect of resistance, however, would warn of another test of $1250.

Spot Gold

* Target calculation: 1425 + ( 1425 - 1250 ) = 1600

The weekly chart shows how penetration of the September high would signal a new primary up-trend. Strengthened if 13-week Twiggs Momentum crosses to above zero.

Spot Gold

Bullish divergence of 13-week Twiggs Momentum on the Gold Bugs Index, representing un-hedged gold stocks, suggests a primary up-trend. Breakout above 280 would confirm.

Gold Bugs Index

Crude Oil

Nymex crude broke medium-term support at $98/barrel. Expect retracement to test the new resistance level, but respect would warn the primary up-trend is over. Divergence of Brent crude reflects both a strengthening European recovery and continued supply threats in the Middle East.

Brent Crude and Nymex Crude

Commodity Prices

China's Shanghai Composite Index is testing medium-term support at 2150. Downward breakout would warn of another correction — a bearish sign for commodity prices. Dow Jones-UBS Commodity Index consolidation between 124 and 130 reflects indecision. Breakout will indicate future direction. A 13-week Twiggs Momentum peak below zero would warn of a continuing down-trend, while cross to above zero would suggest a reversal.

Dow Jones UBS Commodities Index

* Target calculation: 130 + ( 130 - 125 ) = 135



Intellect is not wisdom.

~ Thomas Sowell

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