From Taki Tsaklanos: The price of gold is retracing from its recent rally which peaked at $1250. We called out $1220 and $1260 as two major price levels which investors are watching very closely, as these price levels carry a very high level of importance.
The short term gold price chart (daily chart below) makes that point.
Although gold could go a bit higher from here, it still remains in a long term bear market. The most concerning fact for gold bulls is that most markets are not supporting higher gold prices. In other words, gold is getting pushback from most other markets. In our own words, intermarket dynamics are not lined up to support a gold price rally.
Price of gold vs intermarket dynamics
Markets are not trading in isolation, they trade ‘against’ each other. That is because money flows from one market to another one. That is what we call “intermarket dynamics.”
Right now, stock markets are on the rise, yields are rising which results in a stronger dollar, the Euro is weak. Market conditions are supporting ‘risk on‘. As gold reacts on fear (or on inflation), it seems that markets are lined up for neutral (at best) or bearish (worst case) gold prices in the coming months.
This viewpoint underpins our gold price forecast for 2017.
The only market that is supporting precious metals is the strong bullishness in base metals. However, even with strong price action in base metals, we don’t see a spillover effect on gold, and, more importantly, silver. Given the extended rally in base metals, we would expect that the ‘base metals factor’ will fade in the coming weeks, removing the only bullish factor for precious metals.
The SPDR Gold Trust ETF (NYSE:GLD) fell $0.2 (-0.17%) in premarket trading Wednesday. Year-to-date, GLD has gained 6.68%, versus a 4.55% rise in the benchmark S&P 500 index during the same period.
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