Rising interest rates drive gold through support

By Colin Twiggs
November 21st, 2013 1:30 a.m. ET (5:30 p:m AEDT)

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The yield on ten-year Treasury Notes followed through above 2.75, indicating a fresh primary advance, with a target of 3.50 percent*. Breakout above 3.00 percent would confirm. Completion of a 13-week Twiggs Momentum trough above zero (recovery above say 30%) would strengthen the signal. Reversal below the rising trendline is unlikely, but would warn of another test of 2.50.

10-Year Treasury Yields

* Target calculation: 3.00 + ( 3.00 - 2.50 ) = 3.50

Dollar Index

Rising interest rates would strengthen the dollar. The Dollar Index rallied off support at 79 on the monthly chart, suggesting a test of 84. Breach of the rising trendline, however, still warns of trend weakness, and 13-week Twiggs Momentum respect of the zero line (from below) would strengthen the signal.

Dollar Index

* Target calculation: 79 - ( 84 - 79 ) = 74 or 84 + ( 84 - 79 ) = 89

Gold

Rising interest rates and a stronger dollar weaken gold. Spot gold broke support at $1250/ounce, signaling a primary down-trend. A 63-day Twiggs Momentum peak below zero strengthens the signal. Follow-through below the next support level, the June low of $1200, would confirm. Recovery above $1260 is unlikely, but would warn of a bear trap.

Spot Gold

* Target calculation: 1250 - ( 1350 - 1250 ) = 1150

Crude Oil

Nymex crude is undergoing a strong correction. 13-Week Twiggs Momentum crossing to below zero warns of reversal to a primary down-trend; a peak below the zero line would strengthen the signal. Expect strong support at $85/$86 per barrel. Respect of support would mean that Nymex remains in a primary (albeit weak) up-trend. Diverging Brent crude reflects both a strengthening European recovery and continued supply threats in the Middle East.

Brent Crude and Nymex Crude

Commodity Prices

Copper prices, bellwether for the global economy, respected resistance at $7400/$7500 per tonne and are heading for another test of the 2011 lows at $6800/tonne. Downward breakout would signal a primary down-trend, as would completion of a 13-week Twiggs Momentum peak below zero. Recovery above the descending trendline would be a bullish sign for the global economy, while breach of support at $6800 would be bearish.

Copper

China is a primary driver of commodity prices and a strengthening Shanghai Composite Index has slowed the fall in commodity prices. Dow Jones-UBS Commodity Index broke primary support at 124, but is consolidating in a narrow range below the former support level. Recovery above 124 would be a bullish sign, while follow-through below 122 would indicate a decline to 114*. Completion of a 13-week Twiggs Momentum peak below zero would also suggest a continuing down-trend.

Dow Jones UBS Commodities Index

* Target calculation: 124 - ( 134 - 124 ) = 114



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