Gold miners warning

By Colin Twiggs
June 16th, 2011 1:00 a.m. ET (3:00 p:m AET)

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Gold miners are pointing to a weaker gold price. The XAU index broke through primary support at 195 to complete a double-top reversal. Follow-through below 190 would confirm the signal. Traded on the Philadelphia exchange, the XAU index consists of 16 major precious metal miners.

Gold/Silver Index

The wider AMEX Gold Miners Index $GDM (tracked by the GDX Gold Miners ETF) similarly broke through support at 1500.

AMEX Gold Miners Index

But the Gold Bugs Index $HUI, representing unhedged gold stocks, has yet to follow. Breach of primary support at 500 would confirm. All three indices display a bearish Momentum peak [n] below zero, warning of a down-trend.

AMEX Gold Bugs Index

Spot gold retraced to test support at $1520 per ounce. Recovery above $1550 would signal continuation of the advance, but retreat below $1510 would echo the miner's warning, testing support at $1460. A stronger dollar suggests weaker gold prices.

Spot Gold

* Target calculation: 1575 + ( 1575 - 1475 ) = 1675


Failure of support at $33 per ounce for silver would also suggest that gold is likely to weaken. Recovery above $39 is less likely but would indicate another advance.


US Dollar Index

The strengthening dollar is responsible for weaker gold and commodity prices. A Dollar Index breakout above 76.50 would signal a primary up-trend. Reversal below primary support at 73, however, would warn of a decline to 70*. Bullish divergence on Twiggs Momentum suggests that the down-trend is weakening.

US Dollar Index

* Target calculation: 73 - ( 76 - 73 ) = 70


The CRB Commodities Index is headed for a test of support at 335. Failure would signal a primary down-trend. Recovery above 350 is unlikely, but would signal another advance. Again, the dollar is likely to have a strong influence.

CRB Commodities Index

Crude Oil

ICE Brent crude retreated to $114 Wednesday, while Nymex WTI Crude broke support at $97, headed for a test of the long-term ascending trendline and support at $83 per barrel.

Nymex WTI Crude


The euro is retreating for another test of support at $1.40. Failure of support would signal a primary down-trend.

Euro US Dollar

* Target calculation: 1.40 + ( 1.40 - 1.30 ) = 1.50

Swiss Franc

The Swiss franc continues in a strong primary up-trend against both the dollar and the euro. Respect of medium-term support at $1.16 would confirm trend strength.

Swiss Franc CHF

* Target calculation: 1.00 + ( 1.00 - 0.80 ) = 1.20

UK Pound Sterling

The pound is retracing to test medium-term support at $1.60. The sharp fall on Twiggs Momentum warns of trend weakness. Failure of support would test primary support at $1.53.

Pound Sterling

* Target calculation: 1.63 + ( 1.63 - 1.53 ) = 1.73

Japanese Yen

The dollar again respected long-term support at ¥80. Twiggs Momentum oscillating below zero indicates continuation of the down-trend. Failure of support would signal a decline to ¥75*, but would most likely spur further BOJ efforts to halt appreciation of the yen.

US Dollar Yen

* Target calculation: 80 - ( 85 - 80 ) = 75

New Zealand Dollar

The kiwi dollar retreated below the rising medium-term trendline to warn of a correction. Bearish divergence on Twiggs Momentum strengthens the signal. Expect a test of the long-term trendline at $0.76.

NZ Dollar/ USD

* Target calculation: 81 + ( 81 - 78 ) = 84

Australian Dollar

Weaker commodity prices are likely to weigh on the Aussie dollar, which is again testing support at $1.05 against the greenback. Failure of support would test $1.02. Recovery above $1.075 is unlikely, but would signal a fresh advance.

Australian Dollar US Dollar

* Target calculation: 1.10 + ( 1.10 - 1.05 ) = 1.15

Self-control is the chief element in self-respect,
and self-respect is the chief element in courage.

~ Thucydides (c. 460 BC – c. 400 BC).