On paper gold has never looked better…

A faltering economy, creeping inflation and ongoing geopolitical issues are feeding a resurgence in demand for the yellow metal – and best of all it has cracked a critical six year chart resistance levels. If gold is really “the sum of all fears” then the gold price is saying that not all is rosey in the garden – best of all gold seems to have momentum behind it too.
Year-to-date the US dollar index is off 10.3% and conversely gold in dollar terms is up 16.7% (or 10% for UK investors) and the market is eyeing the 12 month high of $1345 and the 2016 high of $1375 as the next targets. What could possibly go wrong ?
Well the problem is that word “paper” again.
Not all buying is equal – some is sticky and other types are flighty … and it is the flakey end of the market that has driven the market higher, not the physical markets. Mints, refiners and brokers around the world report the same thing … physical demand is weak. Meanwhile we have seen unprecedented buying on the futures markets – and it is an open question whether these typically short-termist buyers will stay the course, or succumb to the temptation to take profit.

This post was published at GoldSeek on 6 September 2017.