Gold back at $1800

By Colin Twiggs
August 18th, 2011 3:00 a.m. ET (5:00 p:m AET)

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Gold back at $1800/ounce

After a brief but volatile dip, gold is again testing resistance at $1800/ounce. Rising Momentum threatens an exponential up-trend, with rapid gains and short retracements. Breakout would signal an advance to $2000.

Spot Gold

* Target calculation: 1800 + ( 1800 - 1600 ) = 2000

Always bear in mind that exponential trends make rapid gains but inevitably lead to a blow-off; and stop losses employed in a normal trend are likely to react too late.

Silver edges higher

Spot silver is headed for another test of $42/ounce after recovering above $40. Breakout above $42 would offer a medium-term target of $46* (long-term $50).

Spot Silver

* Target calculation: 42 + ( 42 - 38 ) = 46

Dollar Index tests support

The Dollar Index has consolidated between 73 and 76.50 for the last 3 months. The recent failed swing, a rally that did not reach 76, indicates weakness and we are now likely to see a test of support at 73. In the long term, with 63-day Twiggs Momentum oscillating below zero, the primary down-trend is likely to continue. Failure of support would offer a target of 70*.

Dollar Index

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

Crude divergence widens

The strength in the Brent reflects the ongoing loss of high quality Libyan crude and fears of its recent replacement Nigerian bonny light�� Royal Dutch Shell declared force majeure on its Nigerian Bonny Light crude oil loadings for June and July. Shell blamed production cutbacks caused by leaks and fires on its Trans-Niger Pipeline.

~ Commodities - Futures Magazine.

The divergence between Brent crude and WTI Light crude has widened to more than $20/barrel. WTI is clearly in a primary down-trend, but there is stubborn support for Brent at $104/105 per barrel. Resolution of the conflict in Libya and/or Nigerian supply fears would see Brent prices soften to within a few dollars of WTI.

Brent Crude

* Target calculation: 105 - ( 120 - 105 ) = 90

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A loss never bothers me after I take it. I forget it overnight. But being wrong — not taking the loss — that is what does damage to the pocketbook and to the soul.

~ Jesse Livermore in Reminiscences of a Stock Operator by Edwin Lefevre.