Gold's Bearish Breakout-In-Progress Confirms USD Strength

More than any other asset, gold invokes strongly defended positions among both its proponents and detractors. Whether you believe gold is “historically the only true form of hard money” or “just a yellow rock with few industrial uses,” it still pays to keep an eye on the price action and evaluate the current trend.

For more than two years, gold hasn’t shown much of a trend at all, with prices consolidating between $1200 and $1400 (excluding a brief spike down to the mid-$1100s in Q4 2016). More recently, the metal has spent the entire first third of 2018 trapped between $1300 and $1365, frustrating bulls and bears alike.

That may be changing with Tuesday's price action: as of writing, gold was trading hands below $1300, down by more than 1.5% on the back of a breakout in US Treasury yields and the accompanying greenback rally:

Daily Gold

Of course, bears have been wrong-footed by failed breakouts before, so it may be worthwhile to wait for a daily close to confirm the breakdown. That said, gold is currently trading well below the 50% retracement of the December-January rally, opening the door for a continuation down toward the 61.8% ($1286) or 78.6% ($1264) retracements next. Astute readers will note that the 1260 area provided support twice back in October of last year.

Taking a step back, Tuesday’s breakout-in-progress serves as a confirmatory indicator of the recent dollar strength. From an intermarket perspective, as long as gold remains below $1300, it will support the near-term “bullish dollar” thesis.

The Coming Copper Crunch

Copper had one of its best years ever in 2017, rising 27% on the back of supply disruptions and steady demand from China, by far the largest copper consumer.
Commodities analysts are usually wrong about copper supply, always predicting a glut in the market for the ubiquitous metal used in everything from piping for plumbing to wiring in houses, to components of electric vehicles. What they fail to account for is the inevitable stoppages at the major copper mines due mostly to strikes and weather problems.

In 2017 however they were right. In January last year a collection of analysts—from BMI, Goldman Sachs, Citigroup) and TD—were all bullish on copper, saying that after a terrible 2015 and 2016, it would be the strongest performing metal of 2017 with predictions of up to $6,200 a tonne come mid-year. By the end of 2017 copper futures trading on the London Metal Exchange (LME) were at their highest in four years, $7,236.50 a tonne or $3.28 a pound. Copper wasn’t the best performing metal of 2017 (that would be cobalt) but it was third behind palladium.

So how has copper done so far in 2018? The base metal is showing a V-shaped curve, with LME copper starting the year at $7,200 a tonne, bottoming out at $6,499 on March 26, and currently trades at $6,721. Spot copper follows the same pattern. It started 2018 at just under $7,200 and was at $6,782 ($3.08) as of May 4. Copper has traded up sharply since the end of March but has pulled back since the end of April.

Copper Price in USD

LME Copper, Historical Price Graph

So what's happening with the copper market and what are the prospects for junior copper companies wanting to find the next big discover to be gobbled up by a major? The article embedded below takes a look at the copper market in detail, including uses, the supply-demand trends and pricing.

However, the overall conclusion, based on the details provided, is that copper is heading for a major shortfall. That can only mean one thing: higher prices

mcx gold tips

gold 31100 pe bought @90 day high 196.50

comex gold targets extended

gold short @ 1324 booked all positions @1302 but it will test 1284

our call profits