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Model Gold Portfolio: Neutral, last signal 12/01 “exit long”

CTM141211Technical Read: On Dec 9th gold popped, breaking above the recent trading range (approx. 112-117.3, GLD basis). My technical indicators had not registered that the market had enough energy to do this in a sustained way. The following 2 days the market drifted back. So the situation is the yellow metal is just above the recent range but technical work is not confirming the breakout. No signal.

Backdrop:

  • Catalyst 1 – The US dollar trend is generally up, though we have seen selling in recent days. The market mood is supportive for the greenback. This is bearish for gold.
  • Catalyst 2 – The S&P 500 had really unusual action this week. After making a new high, the market sold off the 8th then attempted to drop off the next day but buyers came to the rescue before the close. The next two trading sessions (10th and 11th) featured significant intra-day selling. The index is currently resting on support (approx. 2030). If this does not hold, lower S&P prices will be supportive for gold.
  • Catalyst 3 – Crude oil dropped below $60 today. Previously, pundits had signaled a floor near $70. If you look at a 5-year chart, you cannot help but be struck by the fact that all support has been violated and that the recent move has a parabolic theme to it. This energy cost reduction is going to act as a tax-cut for almost everyone and provide a stimulus effect, possibly giving cover for the Fed to end QA. But looking at the 5-year chart, you may feel a drop in temperature, like when a summer storm rolls in suddenly and drops the mercury. Does this mean deflation is on its way?
  • Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.

GH Garrett – Veteran Commodity Watcher for ConquerTheMummy.com

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