Gold Fundamentals have edged into positive territory since late 2015. The CPI measured yr/yr has
probably made a significant low. The oil price has been rising nicely on a seasonal basis, and even
industrial commodity prices have moved a little higher after after an extended basing period. The
dollar is hanging tough after a pronounced rise, but has lost its positive momentum after reaching
unwarrantedly overbought levels. In all though, the improvements have been modest so far, and
unsurprisingly, the rise in the gold price has stalled in the short term.
Forward inflation indicators are still depressed but are edging higher, and gold would likely
benefit if only global economic growth momentum was not so subdued. World industrial output
has had trouble clearing 2% on the upside over the past year, and adjusting for global excess
production capacity via plant shut-ins is a slow and painful process.
Based on its 200 day m/a, gold has reversed a lengthy downtrend and is now in positive mode.
Gold is working off a heavy short term overbought according to the important RSI measure and
may still be slightly over bought on the 14 wk. RSI (Not shown). Stories are making the rounds
about an OPEC production freeze, but since this type of story is typical of post oil price bust
periods, betting the ranch on an actual output freeze now may not serve as well as noting that
the oil price is about to enter a period of seasonal price consolidation to last a couple of months.
The next important resistance level for the gold price is $1300 oz. If gold were to hit that level
any time this year, it would herald what could be the start of a more durable advance.
- 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 !!!