Recently I've seen quite a high blog post "inflation" about the precious metal Gold, so I've decided to give my own outlook about current development in the Gold market. The recent rally in the gold market has been on the front page in the last few days, and everyone is now calling for the secular bull market
resuming his trend.

But if you ask me timing the next big up leg is critical and I only see that coming after we'll have some decent retracement in the equity market.

However recent developments in Ukraine and the possibility to see Russian intervention can be a catalyst for the gold to spike even higher. And at the same time we will see the dollar rallying with gold, which is unusual as they usually move in opposite directions, but with the safe haven status of dollar triggered this can be possible.

  • Figure 1. Gold Long Term Chart.
The next big upleg in gold has nothing to do with the nonsense inflation correlation. The correlation between gold and inflation year over year is less than 0.5 and on a month over month basis, the correlation is less than 0.15. This just proves that gold has never been a hedge against inflation. Gold has been more a hedge against government not inflation and when confidence in governments around the globe will start collapsing only than we'll see gold spike up. The current geopolitical uncertainty in Ukraine and the likelihood of Russia to take back some regions from Ukraine, which historically have been part of Russia, like Crimea, see here recent developments from Ukraine crisis: Russian Ships Carrying Soldiers Said To Be En Route To Sevastopol can trigger the possibility of Ukraine to break apart, which can be very bullish for the gold market.

In Figure 1 you can see the Long Term Chart of Gold and the upside channel that has formed since 2000 when the secular bull market in gold has started. For now we have stopped at the lower base of this channel but it can take up the 1-2 years to establish here a base, before to see the next big up leg in gold, that's the reason why I've said that timing is key because we can bounce here in an $300-400 range for the next 1-2 years before the real move to begin, but that remain to be seen as time will tell how things are going to develop ion the gold market.

Best Regards,
Daytrader21.
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