We have written extensively on gold since last autumn, suggesting the logic for the longer term bullish stance on gold. Momentum remains very strong, but we must admit the recent price action is soon about to get ahead of itself. 1350 has been the line in the sand, and we feel the prudent investor should reconsider holding longs as we approach the big 1350 resistance.
Gold miners, GDX US, is soaring today, gaining almost 3%. Momentum is very strong as price action looks rather squeezy. 23 is a big level to “respect”, but given the speed of the move, we would not be surprised to see it overshoot.
The move from last year’s lows has not been a loved rally (white is net non-commercial longs). Note that gold has been a much more crowded long at other times. Chasing it here is starting to look a bit late.
Buying gold as a fear hedge did make sense during the autumn, and the two assets, gold and VIX, did move in tandem. As we all know, VIX has been in full implosion mode recently. Buying gold for the fear factor doesn´t look overly rational.
There are better and cheaper ways to play a possible fear.
Source, charts by Bloomberg