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Right now, people are wondering if gold is going to retest some of the recent lows below 600, or if this latest gold market is going to retest 640, and go higher this time. I have some research that indicates it will be the 640 plus scenario. As I told my subscribers, some more confirmation will have to occur, but I am willing to go ahead and say we are looking at $640 before we go below 600 again -if that happens. Also, although it has been said that gold is technically somewhat weak, my research indicates that gold is actually ready for a nice bull run. The main reason is gold’s atypical reactions to the USD, oil, and the CRB- Bullish reactions. Reasons: Gold is resisting drops in oil prices. Gold is resisting drops in the CRB. Gold has resisted dropping amidst USD strengthening. Same pattern before the gold short term bear last time, but this time it’s looking bullish About six months ago, I had written that a short term gold bear was in the making, and that was based predominately on the behavior of gold with its usual protagonists/antagonists. At that time, gold would behave bearishly even when it appeared it should behave bullishly. This lasted over a month. My conclusion then was, a short term gold bear market was about to begin. That happened, about a month or two after I anticipated that. This time, I believe the same kind of situation is developing, but this time a gold bull is reemerging, and it will exceed $640 soon, and go beyond. However, I advised readers that $640 is a caution point because gold has sold off recently at that level. However, as we speak, yesterday, gold after rising over 620 last Friday, held its ground again, even as oil dropped $1.70 Tuesday. Again – atypical gold action to oil. And, this morning, Wed, gold is holding above 620. Gold is consistently holding its gains, and is showing resistance to gold bearish information. Now, I surmise the following reasons for gold’s tenacity:
But most important, is the atypical behavior of gold vs the USD, oil, and the CRB. When the USD has been up, gold has repeatedly ignored it, or even gone up too. When oil dropped, gold ignored that as well. When the CRB dropped, gold recently has ignored that. These are signals that the gold market is looking at things other than the usual, and I surmise that the Middle East situation is about to explode into some kind of war with Iran in a month or two, that is very scary, and gold is reflecting this. In any case, the atypical behavior of gold, now for weeks, is ignoring usually bearish information, and staying bullish. This is a strong indicator that gold is headed upward soon. I had said several weeks ago that I expected gold to stay above 600, and that has proven true. One of the reasons was this gold bullish behavior – atypical reactions to normally bearish data – suggested that gold was turning decidedly upward. Here is one example – gold and oil.
This example shows that gold is resisting dropping prices of oil.
Gold has recently resisted a rising USD – rising along with it. This is quite gold bullish. As of this morning, oil is down again about .60, after falling 1.70 Tuesday. Gold is still holding above 620. And, again, gold is resisting a falling CRB. If gold were to be topping in the 620’s, probably some significant profit taking would have already occurred. That is not happening. The gold market is looking to test 640 soon in my estimation. (within several weeks). I suspect that it will stay above 640 this time as well. Now, there are concerns that inflation in the US is abating, and that the US economy is possibly getting past its recent weakness, with improving employment numbers. I, however, am not convinced the US economy is recovering from its bout of weakness. I also surmise the gold market is not convinced either. If US employment numbers continue to increase, then gold will be affected quite bearishly. Overall, however, since gold is acting inversely to normally bearish data, gold is getting ready for a spurt to $640. The Prudent Squirrel Newsletter is Chris Laird’s weekly macro economic gold newsletter. Subscribers are already aware of the content of this article. Stop by and have a look.
The Prudent Squirrel newsletter is Chris Laird’s weekly macroeconomic gold newsletter. A month or so ago, I predicted the short term gold bear market is over based on the weak USD and the continuing concern in the Mid East. That has proven to be true – holding up gold in spite of weakness in the base metals…. Stop by and have a look. CONTACT
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