GOLD 0.51% $1,391.7 gold futures

For the time being, gold is buggered on the momentum side....

  1. 40,612 Posts.
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    For the time being, gold is buggered on the momentum side.

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    The trendline has to hold or else we will most likely test the double bottom.

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    Nasdaq is reacting positively to the bond yield tapering which does not confirm the DXY strength. TA-wise DXY has found the bottom when I as looking at the higher lows from late May. Broke out through the TL so expecting it to at least test the March high.

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    Dow is the weakest of the 3, broke the ST low and confirmed by the RSI falling below 50 neutral line.
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    A few more % drop if Dow is a lead indicator.

    The related asset classes are all over the place. Chiefly I can't work out why bond markets are indicating inflation are more tame than reflected by the commodity momentum unless of course they are warming to the Feds transitory view. I still can't work out why the Feds suddenly doing reverse Repo action by taking liquidity away from the market but if you see bond yield dropping then I can see it is this liquidity that is causing a spike in inflationary pressures. Another reason I have picked up from commentary is that the Repo liquidity for banks are under utilised by the spread between cash deposit v loan provisions.

    As the spreads widens, it is 'costing' banks margins considered as dead money for their deposit taking.

    Regardless of the mechanics in the other financial markets, gold is the victim and the weekly rush for the exit isn't a technical selling, I suspect the correlation to inflation is negative. This week will be key to where gold settles.

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    At the time of Bitcoin massive sell off in May, I was expecting a range play which is as anticipated. When the wedge broke out mid-June, I was expecting a pullback to the circa $37,500 level a rally but the range low-high seems to be the state of play.

    Back to gold on the chart, August all time peak at the time suggested that only through hindsight over months of churning was clearer that it was the distribution phase. I still remember same time in 2016 pre-Trump victory, the same price action was playing out (wedge) before it got slammed in Oct and that peak literally took 3 years to retest!

    Currently if you look bak to 2011 exponential rise and see how the peaks and troughs played out, I suspect we are repeating that top rotation to the downside again. The commentary about money printing has not changed, just more was provided. The only changes are the addition of MMT economic theory and debates actively among the proponents.

    Who would have thought the equity market could have crash so dramatically in the shortest possible time including the recovery. If you said this time last year that US could be facing inflationary pressure very soon, you would be laughed at. So in conclusion, gold=inflation hedge is dead from what I am observing, tapering/QT will destroy the need to rush to an asset with no return. Meantime Russia/China are accumulating gold covertly and they must have pretty long patience if they are thinking of going back to the gold standard.

    Don't fall in love with any asset class!
 
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