Clearly something unusual is going on in the gold market. We are seeing a very sharp move up. From a technical point of view, gold has "broken out" from a very long downtrend. People who follow charts know this sometimes indicates that a move higher may be coming. We have done a couple of blog articles recently that still seem to fit with the move higher we are seeing. We continue to note that BOTH gold and the US dollar index move higher on many days lately. This is unusual and we talk about that in this article.
In this article we pointed out that in 2014 gold was up against all major world currencies except the US dollar. And that it held up pretty well despite a massive rally in the dollar. So this trend of gold strength extends over the past year, but seems to be increasing here lately.
Markets do have meaning so this trend means something. It is too early yet to tell for sure what it may mean. If it continues, it may indicate that as the economic problems increase in the EU, Japan, Greece, Russia and even China, capital may be making a so called "flight to safety." For now, that means money flowing into US dollar related assets and gold. What we need to track for now is if both gold and the dollar stay strong. If, at some point, gold starts shooting past the US dollar along with all other currencies, that is a key signal we need to watch closely. That would suggest an increasing loss of confidence all over the world in the stability of the current financial and/or banking system. The actions of the Swiss National Bank in not doing what they promised to do (cap the franc) has also shaken confidence to some extent.
For those who follow Bo Polny, you know we are tracking his forecast for 2015 here. He has predicted a big move up for gold and also a deep selloff in the stock market. So far in 2015, his forecast is starting to look pretty credible (although its early yet). Here is his latest updated comments published in an article he wrote for the Silver Doctors web site:
Gold and Silver - A parabolic rise in 2015 - Bo Polny
For now, all we can do is track this trend to see if it continues or changes. We will do that here. Markets can move very quickly as we know. We are for sure seeing the volatility we mentioned in our "Fearless Forecasts" for 2015 in late December.
added notes: HSBC Gold Outlook
Friend of this blog Nomi Prins talks about gold on Fox "After the Bell"