Paul : Yes, the present situation with gold/shares is not unambiguously bullish. Nor, is it unambiguously bearish! I don't believe, however, that gold could still go down a lot.
Technically, a consolidation / base does seem to be building in both the gold price and XAU since the beginning of the year. I am not sure of the reason why. Perhaps it is because, at around 60, the XAU is at its historic low level and at $280 the gold price is at its 20 year low and, as with the XAU, at a level from which previous bull markets have started. So, clearly, there is the perception of value.
Fundamentally, however, it is my view that gold/shares cannot really perform while the $US is as strong as it is. Whether this is due to the weakness of the main other currencies (yen, sfranc, dmark) or the lack of domestic inflation. Before we have a proper bull market, therefore, I would expect to see something which would cause significant weakness of the dollar. Maybe a Constitutional crisis caused by Clinton's impeachment could do it? I don't know.
I agree with your view that a fall in the Dow could bring down the gold price, as it has done in the past. I presume the reason for this is the deflation resulting from the destruction of paper assets. Yet, in 1929, I have been told gold/shares were top performers.
I don't subscribe to the "fear" idea, mentioned by Taurus, as being a big reason which will propel the gold price unless for some reason international investors are unable/unwilling to invest in the US dollar. |
