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Gold falls as Fed hawks grow bolder

By Colin Twiggs
October 30th, 2015 4:00 p.m. EDT (7:00 a.m. AEDT)

Advice herein is provided for the general information of readers and does not have regard to any particular person's investment objectives, financial situation or needs. Accordingly, no reader should act on the basis of any information contained herein without first having consulted a suitably qualified financial advisor.



A quick summary of the Fed's latest FOMC statement released Wednesday:

  • Household spending and business fixed investment increasing at solid rates
  • Housing sector improved further
  • Net exports remain soft
  • Underutilization of labor resources has diminished since early this year
  • Inflation remains below 2%, reflecting low energy prices
  • Risks are balanced
  • Inflation expected to rise gradually toward 2 percent over the medium term.

The hawks grow bolder as hourly manufacturing earnings rise — fueled by solid domestic performance — with net exports the only remaining concern.

Interest Rates and the Dollar

Long-term interest rates found support at 2.0% — the Fed's target inflation rate — with 10-year Treasury yields rallying to test resistance at 2.25 percent. Recovery of 13-week Twiggs Momentum above zero would signal an up-trend.

10-Year Treasury Yields

The Dollar Index is testing resistance at 98. Expectation of higher rates will fuel support for the Dollar. Respect of zero would indicate long-term buying pressure. Breakout above 98 would signal another advance.

Dollar Index

Gold

Gold broke medium-term support at $1150/ounce after the latest FOMC statement. Higher interest rates and a stronger Dollar would both weaken demand for gold. Breach warns of a test of the primary level at $1100. A 13-week Twiggs Momentum peak below zero suggests continuation of the primary down-trend.

Spot Gold

* Target calculation: 1200 - ( 1400 - 1200 ) = 1000


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~ George Soros

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