Gold faces conflicting forces

By Colin Twiggs
May 3rd, 2013 5:00 a.m. EDT (7:00 p.m. AET)

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Research & Investment: Performance update

Our ASX200 Prime Momentum strategy returned +30.04%* for the 12 months ended 30th April 2014, outperforming the benchmark ASX200 Accumulation Index by +19.58%.

ASX200 Prime Momentum

The S&P 500 Prime Momentum strategy has been running six months, since November 2013, and returned 7.79%* for the period, compared to 8.36% for the S&P 500 Total Return Index.

A sell-off of momentum stocks affected performance in April, but macroeconomic and volatility filters indicate low risk typical of a bull market and we see current weakness as a buying opportunity.

* Results are before fees, unaudited and subject to revision.

Gold and the Dollar


  • Treasury yields are falling
  • The Dollar is weakening
  • Inflation expectations are falling
  • Gold and silver are testing support

Interest Rates and the Dollar

The yield on ten-year Treasury Notes closed below support at 2.60 percent, warning of another decline. Follow-through below 2.50 percent would signal a primary down-trend, with an immediate target of 2.00 percent*. Reversal of 13-week Twiggs Momentum below zero also suggests weakness. Recovery above 2.80 is unlikely at present, but would indicate another advance.

10-Year Treasury Yields

* Target calculation: 2.50 - ( 3.00 - 2.50 ) = 2.00

The Dollar Index is heading for a test of primary support at 79.00. Peaks below the zero line on 13-week Twiggs Momentum signal a primary down-trend. Breach of primary support at 79.00 would confirm, offering a target of 76.50*. Recovery above 80.50 is unlikely, but would signal that the index has bottomed.

Dollar Index

* Target calculation: 79.0 - ( 81.5 - 79.0 ) = 76.5

Gold and Silver

Gold faces conflicting forces: low inflation reduces demand for precious metals, but low interest rates and a weaker Dollar increase demand.

Spot gold continues to test support at $1300/$1280 per ounce. Failure of support would indicate a test of primary support at $1200, but long tails and 13-week Twiggs Momentum recovery above zero indicate that another test of $1400 remains as likely.

Spot Gold

Silver is more bearish and failure of primary support at $19/ounce would offer a target of $16*. Respect of the zero line (from below) by 13-week Twiggs Momentum suggests continuation of the primary down-trend. A down-swing on silver would be likely to be followed by gold. Recovery above $22/ounce is less likely, but would signal a primary up-trend.

Spot Silver

* Target calculation: 19 - ( 22 - 19 ) = 16

This country has nothing to fear from the crooked man who fails. We put him in jail. It is the crooked man who succeeds who is a threat to this country.

~ Theodore Roosevelt (1905)