GOLD 1 OZ (XAU=X) shrugged off dollar strength
Gold price appears to be decoupling from its inverse relationship to the dollar. For the past month, the gold price has shrugged off dollar strength in favour of equity weakness. Historically, gold has tended to begin its move higher in advance of a dollar decline. Is this what the market is telling us now?
We think something fundamental is changing in the gold market. Eurasian central banks are trading in dollars for gold. The Hungarian Central bank recently added 31.5 tonnes of gold to its reserves, Poland bought 9 tonnes, the Reserve Bank of India purchased 8.46 tonnes while Russia continues to accumulate roughly 20 tonnes per month.
Some gold commentators have suggested that, below the surface, inflation is beginning to bubble and this accounts for a revival in the gold price. This may be but it must be said that expectations of inflation have been largely disappointed over the recent past. The TIPS inflation-protected Treasuries and other market-driven inflation measures have not been giving any signals and wage rates, a key leading indicator of inflation, have been surprisingly stable despite what is said to be a tight U.S. labor market.
Our sense is that gold may be sniffing out potential problems in credit markets, especially in Europe. The European Central Bank has said that it intends to end its purchases of assets (primarily EU sovereign bonds) at the end of this year. Since the ECB is by far the largest bidder for these securities and also a price-insensitive one, we do not see how a crisis can be avoided in the EU sovereign bond market unless Germany relents and allows the buying to continue. Given the rise of populist sentiment in Germany and the growing weakness of Angela Merkel’s government, we doubt the political leadership required for such an unpopular accommodation is possible.
Overall, the bias in prices is: Sideways.
By the way, prices are vulnerable to a correction towards 1,224.22.
The projected upper bound is: 1,257.90.
The projected lower bound is: 1,210.39.
The projected closing price is: 1,234.15.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.
A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 62.7525. This is not an overbought or oversold reading. The last signal was a sell 6 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 62.85. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 50 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 95. This is not a topping or bottoming area. The last signal was a sell 6 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 16 period(s) ago.
Rex Takasugi – TD Profile
PREC.M.XAU= closed up 1.570 at 1,233.170. Volume was -0% below average (neutral) and Bollinger Bands were 40% wider than normal.
Open High Low Close Volume___
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 1,227.38 1,204.31 1,272.37
Volatility: 7 13 12
Volume: 0 0 0
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
PREC.M.XAU= is currently 3.1% below its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect very strong flows of volume into XAU= (bullish). Our trend forecasting oscillators are currently bullish on XAU= and have had this outlook for the last 10 periods.