Intraday Market Thoughts

Is this Gold Bounce for Real?

by Ashraf Laidi
Feb 3, 2016 16:59

Has the time come to buy gold, or is it another false bounce? Ever since its intermediate high of October 2012, gold descended in a long forming downtrend, interrupted by a series of five upward corrections, each lasting no more than 3 months. The yellow metal had been dragged down by a combination of eroding inflation and a raging US dollar. But as central banks become increasingly stuck at negative interest rates, and/or are unwilling to raise rates, then gold's substitute characteristic could help it higher over time. Or will it?

Despite the fresh bouts of QE from Japan in Q4 2014 and the ECB in Q1 2015, none of those currency debasing policies managed to trigger any meaningful rally in gold. Is it different this time? Will a retreat by the Fed on hiking rates in Q1 or/and Q2 be sufficient in dragging down the USD, to the extent of boosting gold?

What about gold stocks? Are they a preferable investment to bullion, or ETFs?  Many strategists have offered confusing analysis about the bullion-goldbugs relationship, not clearly indicating, which leads what?

After issuing a new trade in gold to our Premium subscribers, we back up our idea with a special Premium Video, exploring: i) the lead-lag relationship between bullion and goldbugs;  ii) how to use the GoldBugs ratio in assessing bullion's direction; ii) the cycle pattern of net long contracts in the Comex; and 6 other fundamental/technical forces acting on the prevailing trend. Access to the Gold Video & XAUUSD trade.


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