Gold -- Trading Up On Safe Haven Merits Now

Most of the favorable price action in gold for 2016 reflects a rather mild improvement in cyclical
fundamentals. For the short term, the fundamentals have faded slightly and now gold is advancing
on the Brexit news, with traders anticipating Brexit will trigger heightened uncertainty over the
global economic outlook and tack - on geopolitical instability in the EU with the perceived
possibility that other members, angered by the large influx of migrants to Europe, may look to
exit the union to gain greater sovereignty and get away from the gnomes in Brussels. Could be.
After all, years of weak local economies in the Eurozone, abetted by local austerity programs,
all coming in the wake of Europe's serious recession and God awful slow recovery, have had
withering effects on the political order in any number of localities. Hell, if a well established
democracy like the UK can have political upheavel, what can be said of the lesser lights?

The died-in-the-wool gold bugs are on the long side of the trade, but so are a bevy of momentum
traders and short term hedgers and this suggests that most of the players will need a steady diet
of bad news about economic and financial stability to re-inforce the long side order flow. I would
argue that with the world already six years into a slow and uneven economic recovery that the
odds favor negative surprises. But, without strong cyclical pro - inflation impulses in place, liking
gold as a safe haven only is a risky proposition. I would prefer to see a return of rising commodities
prices, a weaker US dollar and signs of faster global economic output growth in support of gold
than speculation about the effects of possible heightened political disorder. The latter is just too
tough to get a handle on to set strategy.

The weekly gold chart shows the metal is still in advance mode, has broken important resistance
at $1300 oz., has the support of a rising 40 wk. m/a and is again flirting with overbought territory.
Gold Weekly