We have no religion when it comes to contentious topics, especially gold. The yellow metal is just another commodity. Simply, our approach to gold is quantitative, not emotional. After regressing gold’s fundamentals, we identified seven factors that move the price of gold. Above all else, gold is most sensitive to real US bond yields – that is, the lower that real bond yields go, the higher the gold price should go, and vice versa. Importantly, this relationship is strong in the post-Global Financial Crisis (GFC), a quantitative easing era.
Our analysis can be seen in one of the financial industry’s oldest publications – Modern Trader (formerly called Futures Magazine). The article is called “Has the golden moment passed?.”
We highlight this because 5yr and 10yr real yields are making new lows. While it is hard to get excited with gold trading in the middle of a 12-week rectangle, we would argue that gold is biased to resolve to the upside if the correlation to real yields holds.
In our experience, after a long consolidation, it is easy to be left behind. Right now, you are being given two “heads up” warnings not to be left behind: real yields and a 12-week rectangle, one of the most powerful classical charting patterns.
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