Thursday, September 11, 2014

Rising Rates and Gold

The market is most definitely factoring in a rise in interest rates, which is not only pressuring gold but also lighting a fire under the dollar. This has occurred in junction with the continuation of Abe's Japanese QE and talk that Draghi will implement a European style QE.

That said, the price of gold may have already factored the above scenario in. So says the folks at Kitco news.

The points presented appear valid. First off, look at the price of the dollar, here represented in the UUP.

Seems like a short-term parabolic move to me. A parabolic move that may be losing its upside luster. A pullback in the price of dollar, would likely lead to the alternative trade of higher gold prices.

More so, many of the gold/precious metal equities continue to bounce around their respective resistance levels. Lets turn to my go to guy in the space- RGLD.

Even though gold price are scooting around the $1,240 level, off from around the $1,300 per ounce level just a few weeks ago, RGLD refuses to give up the ghost. Not that it still can't give it up and test the 200 day moving average, the stock price, volume, and technical measures look more like a tentative consolidation. Look, I am still of the opinion that we may still see lower prices in the precious metal investment complex. Once we see fed change the language of their guidance, we are likely to see a reversal in the buy the rumor, and investors/traders may sell the news. I would not be surprised if we do not see some information released at this point, allowing for more informed decisions to be made.

And just for informational purposes, the gold timing models I employ have turned more positive.

6-month rolling timing model has dipped below the -1 demarcation. Negative results in the timing model suggests a more positive entry point in the precious metal equities and as gold prices follow the equities, the price of gold.

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