Gold is falling hard today and surprising many. Our logic over past weeks is that gold is basically the “wrong” hedge for possible global fear at these levels and that fact, together with the rather long crowded positioning, is not good for the short term price of gold. The intra day chart has been one-way traffic today.
In late February gold tried the huge resistance at 1350 and failed. The recent bounce from March lows tried the 1325 resistance, but failed. Price action today is wiping out many days of small gains, not pretty. The second “top” being lower than the first is a sign of weakness. Crucial now is to watch for a possible break below the big 1280 level. Note the 100-day average at the 1280 level as well.
The “derivative” of gold is gold miner ETF, GDX US. The GDX US has been on fire lately, but reversed violently lower over past two sessions. The gold ETF, GLD US, versus GDX US ratio has been going one way only since October. Time for a little mean reversion trade should gold continue breaking supports?
Source charts by Bloomberg