The Dollar Index is in a primary down-trend. Short-term support is unlikely to hold. The long-term target is the 2016 low between 92 and 93.
Silver often acts as a lead indicator gold. Testing primary support at $15.50/15.60 per ounce, breach would warn of a primary down-trend.
I have been bullish on gold since the election of Donald Trump as president. My comment last week was:
“Let me put it this way: recovery of gold above $1250 would not be a surprise. And would test resistance at $1300….”
Gold is trending lower, breach of $1215 warning of a test of primary support at $1200.
From a fundamental viewpoint, I can find no strong argument to support a lower gold price:
- The Dollar is falling
- Long-term interest rates are soft
- Trump’s behavior is often erratic
- North Korea successfully test-launched an ICBM, with U.S. Secretary of State Rex Tillerson warning there would not be many good options left on North Korea if the peaceful pressure campaign failed.
So I remain bullish on the long-term outlook for gold. But a peak below zero on Twiggs Trend Index warns of weakness. Breach of primary support at $1200 would mean that all bets are off.
9 Replies to “Gold tests resolve”
What about spiking real interest rates and an extended COT? Those are fundamental reasons for a lower gold price.
Strong reasons? LT rates are soft. Inflation is low but not a strong enough reason given global uncertainty.
Getting very close to the ” all bets off price”
could the fall be due to the thinking that global economies are recovering and less fear of GFC 2 ?
I am sure the reason will become apparent with hindsight but it isn’t (at least to me) at present.
Gold should be weak – it’s finally acting correctly. I cannot see how commentators can use the historical reasons [ currency/risks/inflation/ etc] to support gold in this day-and-age.
There are diminishing uses for gold as a store of value, given far more preferential alternatives. That VIX is so stable at the lowest levels ever, and gold has only fallen marginally, points to the very expensive current and recent price of gold.
Gold should be falling in the short, medium and long term, for the reasons I give above.
Gold price is simply a function of demand and supply.
Demand fueled by:
Supply is more predictable: available existing stock plus diminishing quantities mined as easily accessible deposits exhausted and costs of extracting less accessible deposits rises.
Anyone predicting future intersection of demand and supply is simply guessing.
VIX doesn’t reflect risk, merely current stock market volatility. Impacted by buybacks and growing demand for ETFs.
VIX is a suitable proxy for investment risk, in a much wider context.
That is, stock market volatility has gone done while equities have improved, this improvement partly because of reduced perceptions of economic/political and other associated risks; demonstrated reflection/idea of risk. Have you any other alternative ?
I consider it therefore a valid demonstration of risk appetite, generally, not just specific to equities.
Gold is in a bear market. Take the bets off. TMF is showing you that, too. Lets be consistent with the way we treat TMF [ refer your view on ASX 200 and TMF ]
VIX a “demonstration of risk appetite” – maybe.
VIX a measure of risk – definitely not.
Best example is VIX at 18.81 on August 22, 2008
Bear Stearns had been rescued on March 16, 2008 by JPM with $29bn help from the Fed.
Lehman Brothers followed, filing for Chapter 11 bankruptcy protection on September 15, 2008.
Taken from another site pointed out.
Intuitively, when VIX is in tune with EPU, the market is acknowledging the levels of risk through the prices. However, when VIX is low and EPU high, markets are complacent – they are underpricing risk.
There’s no coincidence that the gold price peaked at the same time the EPU – Economic Policy Uncertainty index decoupled from the VIX, shown at the end of 2011. The market has been deluded to believe that GOLD DOESN’T MATTER anymore. This is shown in VIX index, as it continues to trend lower to the same level in 2007… before all hell broke lose in the markets:
As far as interest rates which the fed reasoning Trump will create more better paying jobs and that is interpreted as inflation so the ” must ” raise interest rates. It didn’t matter when it was destroying savers and pensions In some cases. I think they lost track what their initial purpose was which as now turned into manipulation. Now it appears they want to push deflation.
Anyone remember the 70s till 80. Was it inflation since they brought interest rates up so high and did not stop gold making historic highs or was it loss of confidence that drove gold like it’s driving Bitcoin overseas. They don’t like anything they can’t control or manipulate. They want anything but currency making or hoping to gold unimportant as they are moving to the ultimate manipulation and control of every individual with a cashless system. That way they can get every bit of taxes from you they think you owe. That is a real future threat on so many levels including power outs. Hopefully people are smart enough not to let that happen.
Comments are closed.