This morning’s price action in gold should not catch investors off guard. Specifically, the #1 catalyst we have been anchoring on throughout our bearish thesis on gold and gold mining stocks – i.e. sustained USD appreciation – has been in play since late 2011. Not coincidentally, the spot price of gold is down -26.8% from its all-time peak in AUG ’11 and is officially in a bear market. Moreover, we’ll walk through why this inverse relationship should continue to perpetuate further downside in gold and other commodity markets tomorrow on our 2Q13 Macro Themes call (email for the details).
To be crystal clear we do not see a buying opportunity in gold here. It’s very tough for us to agree with any valuation argument for non-economic assets like gold. And even if one did exist outside of the marketing materials of gold-only funds, valuation has never been and never will be catalyst for any market price in our opinion.
What is often a catalyst, however, is price itself. Gold spot prices remain in a Bearish Formation on our quantitative factoring. Functionally speaking, all three of our core durations of investor classes (immediate-term TRADEers, intermediate-term TREND followers and long-term TAIL investors) are reacting to the same price, volume and volatility signals in gold. More specifically, it would appear many of them are heading for the exits all at once – just as we have been warning throughout our intermittent updates on the shiny rock that is physical gold.
Given that gold is, in fact, just a shiny rock, we tend not to publish an overwhelming amount of research on it. To the extent you’re new to our views here, however, we’ve included hyperlinks to our recent updates below; email us if you’d like to discuss our bearish bias further.