My view on the gold price has been that there would be a decent long side trade off the late
2013 price of $1200 oz. The figuring here was that strong global liquidity growth especially
from the US would foster faster real economic gains in this year and that an acceleration of
inflation would not be far behind in time. It was a good idea for the first half of the year, but
has run into trouble in recent months as economic progress in the EU and China diverged
negatively from the US, and operating rates failed to rise enough to generate some cyclical
inflation pressure. This was the case for one commodity near and dear to gold bugz, namely
the price of crude oil. Since mid-year it has weakened also failed to rebound here in Sep.,
a normally strong seasonal period.
the EU is under greater pressure to re-inflate the economy monetarily and folks have mis-
read China where monetary policy has been easy through the bulk of the year. With US
liquidity still strong, the potential for inflation down the road remains. But first there has
to be a firming in the balance of global economic / supply demand, which has yet to take
shape. Even in the US, where production growth has been stronger this year, the operating
rate is still a little shy of 80%, a kick off point for inflation pressure.
Meanwhile, the gold price has fallen enough to begin piercing long term trend support
and is a bit above intermediate term trend support at $1200. Weekly Gold
The metal is fast approaching a significant oversold on weekly RSI and may need to have
the oil price stabilize in the next few weeks to hold its ground. If gold can hold support at the
$1200 level there should be a bounce but more cautious traders may consider watching
global demand measures such as the forthcoming Markit global mfg. PMI due next week.
- 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 !!!