Oh my gold!

Quotable

“Gold is what people worship if they don’t go with the invisible God.”
James Dye

Commentary & Analysis
Oh my gold!

If you caught our Currency Currents issues last week, one might deduce that we’ve described the optimum environment for investing in gold.

We hit on technocrats, out-of-control spending, unprincipled politicians, entitlement, monetary malaise, fiscal disorder, etc.

If we were you, we’d probably deduce the same thing: time to bet on gold.

But there seems to be a small problem as the markets get revved up this week …

Gold is falling.

It is down almost 2% at writing this. But it is not merely the sizeable downside move that’s caught my attention; it is the break of some critical support levels that, in the short-run, open up the door to further downside:

Seems like a convincing move so far today.

The long-run isn’t being threatened just yet – gold remains in a longer-term uptrend. But it’s not very reassuring that gold is failing to make hay in an environment so well-suited to the bugs.

Historically positioned as an inflation hedge, gold is not an ideal reflection of inflation in the US or the developed world. But I recently showed a correlation between Chinese inflation and gold. Here it is again; a chart of China CPI (including the November figure) and the price of gold:

Watching …