Trade tensions between the US and China escalated to an all-out trade war. The Chinese Yuan broke out and closed above 7.00 for the first time since 2008. China is allowing its currency to fall against the US Dollar to reduce the sting of declining exports. It looks like a currency war is gaining momentum.

Gold rallied to significant resistance surrounding $1525 on fading momentum. Prices could probe a little higher, but I think the technicals and extensive commercial short position favor a topping process for the yellow metal. Longer-term, the bull market is just getting started.

Commercial gold traders increased their net-shorts in gold to 324,325 contracts. By comparison, their record short-position was 340,207 contracts in July 2016, when gold peaked at $1377.50.

Global interest rates are near record lows; one-third of all sovereign debt is yielding a negative return. This trend is likely to continue as long as inflation remains low. The 10-year Treasury yield capitulated last week, and a bounce is expected. A short-term rebound in yields may trigger a technical correction in gold.

Experts believe the 10-year yield could drop to 1% or lower next year. If correct, then interest rates for 30-year mortgages in the US could slip below 3% (currently 3.85%). That would yield significant refinancing opportunities for residential homeowners.

WEEKLY 10-YEAR TREASURY YIELDS

The 10-year Treasury gapped lower with an RSI below 30. This behavior often signals exhaustion and capitulation. Extremes in the weekly RSI frequently accompany turns in the gold market. A weekly close above 18.42 (1.84%) would confirm an exhaustion gap and support a rebound towards 2%.

GOLD WEEKLY 

After breaking out of the six-year base prices are coming into the first significant resistance level surrounding $1525. With the commercial short position near record highs, a near-term top is favored followed by a technical correction. A pullback to the breakout area between $1340 – $1380 is possible and would yield an attractive buying opportunity.

SILVER WEEKLY

Prices probed the upper band of the 200-day MA envelope. To establish a bull market breakout, silver needs a multi-week rally above $17.14. The last confirmed breakout occurred in 2003. Prices will break sharply higher at some point; it’s just a matter of when. Note, a reading of 90+ in the weekly trend meter often validates a new bull market.

GDX

An interim top is yet to be confirmed. The rounded MACD supports a likely topping process. Finishing below Wednesday’s $28.11 gap would prescribe a top. Miners could rise a bit further and perhaps test the 2016 high at $31.28, but with fading technicals, it appears prices are much closer to an interim high than a bottom.

GDXJ 

Juniors reached the ABC measured objective on Wednesday. Closing below the gap at $41.22 would recommend a top. More upside is possible, but negative divergences in the MFI and MACD support an aging trend.

SPY 

The recent pullback in stocks was quick and sharp. The MFI (top) slipped to oversold territory, and prices are bouncing. The uptrend remains intact. Prices would have to close progressively above 296 to register an interim low. Failing to recover 296 could trigger a secondary decline towards the intermediate trendline just below the 200-day MA.

WTIC

It looks like oil is trying to put in a double bottom around the $50.00 level. A close above Friday’s $54.92 high would recommend an interim low. The longer-term trend is bearish, and prices would have to exceed the July high ($60.94) to secure a bullish reversal.