The onset of a bear market has shifted the gold bull / bear battlefield downward from
the $1800 -1550 oz. range to a new range $1550 - 1350. This range could stay in place
for many months to come but may well not given gold's volatility and the speculative
interest in it from both bulls and bears. The metal is bouncing back from a classic
bout of climatic selling that brought it to a very deep short term oversold position. The
vertical nature of the rebound cautions that even if there is decent recovery rally, the
road back will likely include some sharp sell offs.
New resistance up at $1550 ranks as technically formidable. Support at the $1350 level
is far less secure as is secondary support down at $1250 oz.
The gold price has tanked off the 2011 high despite positive monetary indicators, so that
very powerful prop since gold began its run early in the prior decade has been knocked
out. My global industrial output growth indicator is moving up far too slowly to
support an ebullient gold market and as the chart link ahead will show, gold is still
trading at a premium to the oil price, since 13 barrels of oil per ounce of gold is probably
a good longstanding rule of thumb. Gold Chart
The gold monks who toil at the abbey will continue to busy themselves with devising new
bullish scenarios, but a period of dreary sub-par global growth and subdued inflation
pressure which we are living through now is not conducive to a strong market for precious
metals as there are no nasty edges to capture, just the blah outlook instead.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!