Dollar rises, gold and silver threaten support

By Colin Twiggs
July 11th, 2012 9:00 p.m. ET (11:00 a:m AET)

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The US Dollar Index rallied to test resistance at 83.50. Breakout would target the 2010 high of 88.00. 63-Day Twiggs Momentum oscillating above the zero line indicates a strong up-trend.

US Dollar Index

* Target calculation: 82 + ( 82 - 78 ) = 86

Spot Gold is consolidating above primary support at $1530 per ounce. 63-Day Twiggs Momentum below zero signals a primary down-trend. Downward breakout would offer a target of $1300*.... unless the Fed introduces QE3.

Spot Gold

* Target calculation: 1550 - ( 1800 - 1550 ) = 1300

Spot Silver is similarly testing primary support at $26 per ounce. Breakout would offer a target of $16* .....again with the QE3 caveat.

Spot Silver

* Target calculation: 26 - ( 36 - 26 ) = 16

Commodities continue in a primary down-trend, warning of a global economic down-turn. Respect of resistance at 295 by the CRB Commodities Index would warn of another primary decline, with a target of 235*. 63-Day Twiggs Momentum oscillating below zero indicates a strong down-trend. Penetration of the descending trendline is unlikely, but would suggest that a bottom is forming.

CRB Commodities Index

* Target calculation: 265 - ( 295 - 265 ) = 235

Brent Crude is also testing resistance — and the descending trendline — at $100 per barrel. Respect would indicate another decline, with a target of $75 per barrel*. There are two wild cards that could impact on price: tensions with Iran and QE3.

ICE Brent Afternoon Markers

* Target calculation: 100 - ( 125 - 100 ) = 75

The gold-oil ratio (measured against Brent crude) is close to its mid-point of 15.0, offering little in the way of overbought/oversold readings for gold over the last few years (after a false overbought reading — above 20 — in 2009).

Gold-Oil Ratio

To kill an error is as good a service as, and sometimes even better than, the establishing of a new truth or fact.

~ Charles Darwin