Treasury yields plunge

By Colin Twiggs
October 15th, 2014 8:00 p.m. EDT (11:00 a.m. AEDT)

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The yield on ten-year Treasury Notes broke primary support at 2.00%, plunging to a low of 1.86% in the morning before recovering to 2.10% at the close. Expect strong support at 2.00*. 13-Week Twiggs Momentum (below zero) has been warning of a primary down-trend for some time. Recovery above 2.30 is unlikely at present.

10-Year Treasury Yields

* Target calculation: 2.30 - ( 2.60 - 2.30 ) = 2.00

Falling inflation expectations are behind the drop, with the 5-year inflation breakeven rate — 5-year treasury yields minus the 5-year TIPS rate — making a new 2-year low.

5-Year Inflation Breakeven Rate

Low interest rates strengthen demand for gold as they reduce the carrying cost.

A falling dollar suggests that domestic purchases are driving the surge in Treasury prices, rather than international buyers. The Dollar Index is testing its new support level at 84.50. Respect would confirm a primary advance with a target of 89*. Rising 13-week Twiggs Momentum continues to indicate a healthy (primary) up-trend. Failure of support at 84.50 is unlikely, but breach of the secondary trendline would warn of a correction to the primary (trendline).

Dollar Index

* Target calculation: 84 + ( 84 - 79 ) = 89.00

Bears eye gold

Gold is testing resistance at $1250/ounce after a two-week retracement. 13-Week Twiggs Momentum (below zero) continues to indicate a primary down-trend. Respect of resistance at $1250 would confirm this. And breach of primary support at $1180 would offer a long-term target of $1000*.

Spot Gold

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

Silver has already broken long-term support, signaling another primary decline. Gold is likely to follow.

Gold Bugs Index, representing un-hedged gold stocks, is also testing long-term support (at 190). Breach of support would strengthen the bear signal for gold.

Gold Bugs Index

Man is not the enemy of man, but through the medium of a false system of Government.

~ Thomas Paine, The Rights of Man


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