This is the monthly RSI view. August 2011 top represents the first line - fast forward to now and we are overbought on the monthly RSI according to standard convention (not my interpretation) - something that has only occured once in 9 years and that was the top in Aug last year. I'm calling this a danger period for a potential sharp retracement, near historical highs; theres a culmination occuring short term.
Irrespective of the above, all marco indicators are gold will go much higher longer term.
Rick Rule from Sprott in a recent inteview with Real Vision applies his 45 years of experience to the current market.
What is driving gold: Debasement of the USD . Higher Debt and Deficits . Low Real Interest Rates.
Liquidity Crisis: Sell off of equity market including gold stocks (sell everything event) . Bullion moves first . Large goldies next as a result of industry established (gold professionals then the public), proven producers, improved cash flow, lower costs, improved balance sheet, Mid sized goldies next, exploration next, silver equities last, but with the greatest movement.
So at the moment we are just past equity liquidity phase 1, but there are some serious dangers that Wall Street is not a reflection of the real economy, like the oil market is for instance, and there could be a further sell off, which may also drag in goldies short term. The NASDAQ is only ~2.5% from its highest monthly close (8992 vs 8787 April to date) - WTF! Its trading within a daily swing range.
What do we know about the risks to Wall Street, despite the FEDs so called stimulus QE-Infinity.
Zero vaccine for COVID19 with no vaccine in sight for 12 months tops.
Former FDA Commissioner suggests that COVID19 is more lethal than the Spanish Flu.
Wave 1 of 3 Waves over months. Wave 2 is historically worse than wave 1.
Massive corporate debt and country debt.
Massive fiscal deficits.
High likelyhood of corporate insolvency - they've already started. Small and medium business to follow.
Disjointed economy restarts and border lock downs.
Pending US election with a POTUS looking to push the states back into some form of normality to shore up his chances.
Italy and other European countries at the brink of Debt/GDP ratio 120%+. USA heading down the same path.
All adds up to additonal unlrealised risk for the equity markets despite them trading back up on forward hope.
Don't get me wrong, gold is performing as an asset class vs equities despite their recent rally, but gold equities may again be sold off in a secondary equity market sell off, this time being lead by the NASDAQ (google and facebook advertising revenue drops may be moderated by Amazon's ascending sp).
Its simply a scenario based on known facts and decent probability of the scenario unfolding. Its definitely not meant to act as advice.
The quarterly for each of the OZ based goldies will tell the story.
SBM Price at posting:
$2.58 Sentiment: Hold Disclosure: Held
(20min delay)