“If you want to get Gold right, you have to get rates and the U.S. Dollar right.”
—Hedgeye CEO Keith McCullough
As you can see in the video above, the U.S. Dollar has a negative correlation of -0.97 to Gold over the past 90 days, meaning their prices move in direct opposition to each other. Pay attention to the 10-year Treasury yield and direction of the U.S. dollar — both are expressions of future growth expectations.
Recently reported economic data including U.S. GDP, ISM Manufacturing and Durable Goods orders all suggest that U.S. economic growth is accelerating.
And at the right level, you sell gold.
WHEN TO SELL…
Our proprietary model signals gold is overbought. It suggests Gold has almost 4% downside at current prices to $1121 per ounce. However, an even better spot to sell, McCullough says, is when the 10-year Treasury yield hits 2.41%. That would imply Treasuries (and hence other asset classes that benefit from slower U.S. economic growth) are also overbought.