Make Kitco Your Homepage

Gold selling is a bit extreme, compared to dollar and stocks

Commentaries & Views

Gold paused yesterday, and of course still doesn‘t look ready to rebound. But does it mean it‘s acting consistently weak? No, and today‘s analysis will show that its better days will come – and we won‘t have to wait for all that long.

Let‘s dive into the charts (all courtesy of www.stockcharts.com).

Gold in the Spotlight

Today‘s premarket price action isn‘t a nice sight to the precious metals bulls, as gold is largely mirroring silver‘s losses. But how far can this short squeeze reversal trade run? Can it usher a new downtrend?

I don‘t think so. The protracted gold basing pattern I described last Monday, is holding up. What we‘re seeing, is a kneejerk reaction to a 33K drop in new unemployment claims (supportive for risk on assets). Does it mean that we‘re on the doorstep of a strong job market recovery? Given last 6 month payroll developments, it would take us … 5 years to get back to pre-corona levels.

This gold chart will get a fresh facelift and a new red candle today. I look for the volume at the close, and the size of the lower knot first before drawing conclusions. Now that prices sunk below $1800, the lower Bollinger Band is getting pushed. Is a new trend starting here? That‘s the key question and I still say no as this (isolated) kind of a strong move meets corrective forces next.

The dollar and gold chart shows that the strongly negative correlation is slowly giving way to more indepedent trading between the two assets. Now that the dollar is in a short-term run higher, it‘ll exert less pressure upon the precious metals.

Is gold‘s slide today announcing much higher dollar values ahead? The dollar is less than half a percent higher while gold plunged by over two and half percent, which doesn‘t look like a move that can last, based on the fiat currency vs the metal of kings intermediate-term dynamic.

Rising yields accelerating their decline in 2021, are another factor of gold‘s short-term headwinds. While I don‘t see yields as falling from a medium- or long-term perspective any time soon, they are set to stop dragging gold to the downside – and the Dec 2020 and also 2021 performance shows that gold buyers are happy to step in and buy the plunge.

Gold to corporate bonds ($GOLD:$DJCB) ratio reveals the yellow metal as keeping gained ground. The rising Treasury yields are a manifestation of a large spending bill coming, and deteriorating public finances, which will catch up with the greenback.

Summary

Gold is under short-term pressure, and the comming sessions would show just how much the market thinks the current fall has been overdone. The basing pattern remains unbroken, with technicals and fundamentals in place for the upcoming bull run. Patience is still the name of the game in precious metals currently still.

Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for both Stock Trading Signals and Gold Trading Signals.

Thank you,

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.