Bearish outlook for Gold

By Colin Twiggs
February 5th, 2015 3:00 a.m. ET (7:00 p.m. AEDT)

Advice herein is provided for the general information of readers and does not have regard to any particular person's investment objectives, financial situation or needs. Accordingly, no reader should act on the basis of any information contained herein without first having consulted a suitably qualified financial advisor.

Ten-year Treasury Note yields rallied off support at 1.65% and are likely to re-test resistance at 2.00%. But this is a long way from an up-trend and we may still see another test of the 2012 low at 1.40%. A wild card in the equation is the extent of international purchases of US Treasuries by countries (notably China) seeking to increase their competitiveness in export markets. This was a sizable factor suppressing long-term yields towards the end of Alan Greenspan's reign at the Fed. Declining 13-week Twiggs Momentum below zero signals a strong down-trend. Recovery above 2.00% is unlikely, but would warn that the down-trend of the last 12 months is coming to an end.

10-Year Treasury Yields

Dollar strength may also reflect capital account inflows from Asian exporters. The Dollar Index is headed for a test of long-term resistance at 100. Rising 13-week Twiggs Momentum signals a strong (primary) up-trend. Retracement to test support at 90 remains a possibility, but the likelihood of reversal below this level is remote.

Dollar Index

* Target calculation: 90 + ( 90 - 80 ) = 100


Gold retraced from resistance at $1300/ounce, finding support at $1250. Breakout above $1300 would signal a rally to $1400/ounce, but trend reversal is unlikely. Retreat below $1200 is also unlikely at present, but would confirm a long-term target of $1000*.

Spot Gold

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

Silver retreated from resistance at the former support level of $18.50/$19.00, testing support at $17.00. Breach of this level would warn of another test of $15, while respect would test resistance at $19. A trend change, signaled by 13-week Twiggs Momentum crossing above zero, would strengthen the argument for a bullish view on gold. But it is hard to give this much credence while inflation remains low and the dollar strengthens.


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