Feb 6 2017
| Gold Weekly Close | DXY Weekly Close | US2Y Weekly Close | US10Y Weekly Close |
|---|---|---|---|
| $1,221.60 | 99.73 | 120 bps | 247 bps |
| US Real Rates Weekly Close | 1D Z-Score | 1W Z-Score | TrendFlex Alert |
|---|---|---|---|
| 2 bps | 1.58 | 0.032 | YES |
Gold had another strong week following a more dovish stance from the Federal Reserve last Wednesday, leaving the Fed funds rate <75 bps.
Moreover, gold futures were able to close above the key resistance level of $1,200 – a level last seen in November.
The growing uncertainty of President Trump’s rhetoric and policy is surely adding to the speculation. In response to Trump and a dovish Fed, gold traders are adding up on $1,250 call options which volume increased 53 percent.
With that aside, an often overlooked indicator for gold trajectory is signaling further potential gains: real yields. Real yields surged following President Trump’s election win, catapulting from -32 bps to 31 bps on increasing inflation and growth prospects.
However, as MacroView predicted, gold would gain ground as the velocity of climbing interest rates and U.S. dollar slow following the anticipated 25 bps hike from the Federal Reserve.
Since hiking, real yields fell almost 50 percent of the post-election surge, declining to 2 bps from 31. In the same time, gold increased 8.9 percent v. 1.9 percent for the SPX.
We’re inclined to believe gold has further upside.
According to Commitment of Traders report, on a 5-year percentile, institutional investors continue to unwind dollar positioning, while hedge funds are increasing.
Historically, the exiting of institutional investors has been a key indicator that the trend is ending. The move could be further exacerbated if hedge funds begin to unwind.
In regards to gold, money managers continue to increase their net-long positioning.
Key Weekly S/R Levels
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