Gold has been a complete and total mess the last 12 months. There is no clear direction, only confusion. Lets try to make sense of it.
Two downtrend lines since August are still intact. Two shorter-term uptrend lines broken. The bulls just seem powerless.
There is also a longer-term uptrend line in place since about May of 2019 which was penetrated in the flash crash about 2 weeks ago. It may have bounced off $1676 support and there may have been decent volume but once again we see loss of momentum when trying to penetrate moving averages. I believe we will eventually break $1676 support and head lower.
DXY appears to be entering a new uptrend which will further pressure gold. Whatever your view is on inflation, you have to respect the market sentiment. And right now, the prevailing sentiment is inflation is transitory or there is an economic slowdown coming that will tame inflation.
Another idea I would like to throw out there, maybe gold just trades like a currency and that’s why we don’t see years of compounding returns as we see in equities. Equities have compounding earnings and return on capital. Gold does not. Maybe the highs of 2011 are just as good as it gets and ultimately we are headed back to $1200-$1400.
Two downtrend lines since August are still intact. Two shorter-term uptrend lines broken. The bulls just seem powerless.
There is also a longer-term uptrend line in place since about May of 2019 which was penetrated in the flash crash about 2 weeks ago. It may have bounced off $1676 support and there may have been decent volume but once again we see loss of momentum when trying to penetrate moving averages. I believe we will eventually break $1676 support and head lower.
DXY appears to be entering a new uptrend which will further pressure gold. Whatever your view is on inflation, you have to respect the market sentiment. And right now, the prevailing sentiment is inflation is transitory or there is an economic slowdown coming that will tame inflation.
Another idea I would like to throw out there, maybe gold just trades like a currency and that’s why we don’t see years of compounding returns as we see in equities. Equities have compounding earnings and return on capital. Gold does not. Maybe the highs of 2011 are just as good as it gets and ultimately we are headed back to $1200-$1400.