Strong Dollar weakens gold

By Colin Twiggs
August 14th, 2014 3:00 a.m. EDT (5:00 p.m. AEST)

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  • Treasury yields decline
  • Dollar strengthens
  • Crude oil weakens
  • Gold hesitates

Interest Rates and the Dollar

The yield on ten-year Treasury Notes is testing support at 2.40 percent. Breach would confirm a primary decline with a target of 2.00 percent*. 13-Week Twiggs Momentum holding below zero strengthens the bear signal. Recovery above 2.50 is unlikely, but would suggest a rally to 2.65/2.70 percent.

10-Year Treasury Yields

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

The Dollar Index broke resistance at 81.50, signaling a long-term advance to 84*. Expect retracement to test the new support level. Recovery of 13-week Twiggs Momentum above zero also suggests a primary up-trend. Reversal below 81.00 is unlikely, but would warn of another test of support at 80.00.

Dollar Index

* Target calculation: 81.50 - ( 81.50 - 79.00 ) = 84.00

A rising dollar and falling treasury yields both suggest that inflation expectations are falling.

Gold

Gold found medium-term support at $1280/$1300, but oscillation of 13-week Twiggs Momentum around zero indicates hesitancy. Recovery above $1350 would indicate a primary up-trend, while breach of support at $1240/$1250 would signal a down-trend.

Spot Gold

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

Declining crude prices may also be contributing to lower inflation expectations and weaker gold demand as an inflation hedge. Brent Crude breach of $104/barrel would signal a primary down-trend, reducing the possibility of a sustained rise in the gold price.

Gold and Crude

Pointing to another world will never stop vice among us;
shedding light over this world can alone help us.

~ Walt Whitman