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Gold tumbles as Treasury yields fall

By Colin Twiggs
May 29th, 2013 3:00 a.m. EDT (5:00 p.m. AEST)

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Overview:

  • Treasury yields fall
  • The Dollar strengthens slightly
  • Stocks are rising
  • Gold breaks support

Interest Rates and the Dollar

The yield on ten-year Treasury Notes broke primary support at 2.50 percent, warning of a decline to 2.00 percent*. Reversal of 13-week Twiggs Momentum below zero confirms weakness. Recovery above 2.80 is most unlikely at present, but would indicate another advance.

10-Year Treasury Yields

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

The Dollar Index is testing resistance at 80.50. Recovery of 13-week Twiggs Momentum above zero would increase the chances of a double-bottom reversal (to a primary up-trend), but respect of resistance remains as likely and would test primary support at 79.00. Another 13-week Twiggs Momentum peak below the zero line would signal continuation of the primary down-trend.

Dollar Index

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

Stocks and Housing

Falling long-term interest rates are likely to boost the housing sector and the broader stock market. The Dow Jones Industrial Average is heading for a test of the recent high at 16750. Rising 21-day Twiggs Money Flow signals medium-term buying pressure. Retracement that respects support at 16500 would confirm an advance to 17000*.

Dow Jones Industrial Average

* Target calculation: 16.5 - ( 16.5 - 16 ) = 17

Gold and Silver

Gold faces conflicting forces: low inflation reduces demand for precious metals, but low interest rates and a weaker Dollar increase demand. At present low inflation seems to have the upper hand, driving gold through support at $1300/$1280 per ounce. Expect a test of primary support at $1200. Reversal of 13-week Twiggs Momentum below zero reinforces the bear signal. Recovery above $1300 is most unlikely, but would warn of a bear trap and rally to $1400.

Spot Gold

The only thing is, people have to develop courage. It is most important of all the virtues. Because without courage, you can't practice any other virtues consistently.

~ Maya Angelou, author and poet, died yesterday at age 86.

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