As outlined in an Apr.13 post on the gold price, gold fundamentals have, on balance, turned mildly
positive. There was a nice long gold trade late in 2015 as fundamentals transitioned to positive, but
the price soon became strongly overbought, and it was reasonable to question whether gold had
come up too far too fast given the very mild improvement in the underlying fundamentals. It was
also mentioned that should the gold price break above $1,300 oz., we might have a very interesting
situation. $ Gold Daily
The chart shows the evolving powerful short term overbought position on gold and the negative
price reaction at important overhead resistance at $1,300 just as the USD (bottom panel) went
into rally mode, all at the beginning of May. Dollar players have been wagering that the dollar
will continue to strengthen should the Fed elect to raise the level of short term rates at the Jun.
FOMC meeting, if not maybe at the following one. I like the USD longer term, but its fundamentals
have not improved enough to support a value above the high 80's in my view. That is a minority
position these days, but with the gold price now approaching an oversold situation, gold is
on the radar screen for the next few weeks to see if it can rally off the oversold.
- 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 !!!