Gold hesitates in downward trend

By Colin Twiggs
January 13th, 2013 3:30 a.m. ET (7:30 p:m AEDT)

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The Gold Bugs Index, often a leading indicator of spot prices, is retracing to test the new resistance level at 210. Respect would confirm a decline to the 2008 low at 150. Recovery above 280 — and 13-week Twiggs Momentum crossover to above zero — would signal reversal to a primary up-trend, but that is unlikely at present.

Gold Bugs Index

Spot gold respected long-term support at $1200/ounce and follow-through above 1250 would suggest a bottom is forming. Recovery of 13-week Twiggs Momentum above zero would indicate a primary up-trend. Failure of $1200 is more likely, however, and would warn of a decline to 1000*.

Spot Gold

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

Dollar Index

Higher interest rates and a stronger dollar would increase downward pressure on gold.

The yield on ten-year Treasury Notes encountered strong resistance at 3.00 percent. Retracement is headed for a test of support at 2.75. Breach of that level would test primary support at 2.50, but reversal below 2.50 is unlikely. Breakout above 3.00 is more likely and would offer a target of 3.50 percent*.

10-Year Treasury Yields

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

The Dollar Index has twice respected resistance at 81.50 and we can expect another test of medium-term support at 79.80, but penetration of the declining trendline indicates downward momentum is fading. Respect of 79.80 would suggest another test of 81.50. Breakout above 81.50 would signal a primary advance, with recovery of 13-week Twiggs Momentum above zero strengthening the signal.

Dollar Index

* Target calculation: 81.5 + ( 81.5 - 79 ) = 84

Habits are safer than rules; you don't have to watch them.
And you don't have to keep them either. They keep you.

~ Frank Crane