The incredible run higher of the past week shows little sign of stopping. Hitting all-time highs on gold opens blue sky trading for gold. With the breakout, we remain bullish but have to also be cautious now, given the increasingly overstretched near term momentum. We are on the lookout for exhaustion signals and potential profit-taking. However, for now, the bulls remains firmly in control.
The bull run on gold continues to accelerate away. The chart below shows a move above $1920 to an all time high.
However, with gold also marking ever higher all-times highs priced in euros and sterling, it is clear too that gold is an asset performing strongly in its own right as well.
The dollar weakness has been a clear source of the move on gold (along with falling yields).
The Dollar Index has now broken below its key March low and this is a bearish move for the dollar moving forward. Any near term technical rally on the dollar (perhaps into 94.63/95.70 on Dollar Index) will a likely generate profit-taking signals on gold. Despite this, we would still view this as a near term move and be another chance to buy gold.
Furthermore, we also believe that with Treasury yields stuck around the floor of recent months, this could also mean that buying pressure in this bull run on gold could begin to dry up (at least near term).
Despite all this though, the price seems to be going just one way right now. However, nothing goes up for ever though, and we look for technical signals to give us an indication of a near term turning point.
Near term moves aside though, fundamentals underpin and point to continued support for gold. Loose global monetary policy for many months (and possibly years) to come, will keep real yields subdued/negative and should continue to mean gold is attractive. Subsequently, this is still a good environment to be buying gold into weakness.
- $1905 – 24th July high
- $1898 – 23rd July high
- $1878 – near term pivot support
- $1943 – intraday high on 27th July,