The gold price made a fast double bottom down at $1200 oz. just as the seasonally strong
period for gold demand got underway in early July. Gold started to rally in a favorable
pro-inflation context. There has been a moderate acceleration of the US CPI from very
depressed levels, the oil price is in a favorable seasonal mode, the US dollar has been
under sudden pressure and commodities prices generally have been faring better since the
beginning of July Gold Price With Panels For $USD, Oil and $CRB
The timing for a turn in the seriously distressed gold price could not have been better. There
has also been help from a mild positive turn in sensitive materials prices and the accelerated
weakening of several emerging economy currencies such as India and Indonesia.
Gold is rapidly getting overbought in the short run but this is not so on a more extended
six month basis. Moreover, oil and gold can run strong seasonally into the autumn.
Now the rally has been a very fast one and it is difficult to project whether all the afore-
mentioned factors will remain in supportive roles. If you are riding this rise in the gold
price, you need to watch the constellation of supporting players and you should also note
that you are competing with very fast, large money coming over from bonds and just
recently, from stocks.
As readers know, I inadvertently called the recent bottom in gold at near $1200 when I
shelved the shorting of gold because it had fallen down to levels near or at production costs
(6/27). I am not at all ready to proclaim a new bull market for gold. I would note that when
a financial asset , commodity or precious metal comes off a perfect, long term parabolic
pattern such as gold recently has, the odds favor an extended period of price weakness
along with occasional, sharp rallies. Gold Price - Long Term History lays the burden of
proof at the hooves of the bulls.
- 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 !!!