Gold bugs are enjoying some relief at the moment with the rally in gold back to U$1,424 an ounce, up from the low around $1,326. Unfortunately, the fundamentals remain the same, and the chart is now offering a potential sell entry level. It may be time to put those seatbelts back on.
Gold is different to other non-precious commodities. IMO the big driver of the sell off is the market pricing the end of US Federal Reserve stimulus programs – not the global growth outlook. This hasn’t changed in the last six trading days – in fact, lower than expected jobless claims on Friday night may have added to the argument.
Now, have a look at the chart:
Gold – Daily
Note the retracement of the fall from just below $1,600. The rally so far brings us back to the 38.2% level at $1,428. Fibonacci retracements are not predictive of trend changes – they merely indicate levels to look for trend changes. However, my fundamental view combined with the easing of the RSI away from oversold levels has me looking at the following trade:
Gold vs G5 Stimulus (US, Japan, France, Germany, UK)