This Monday morning, no move appears clearer than this: sell gold. There is a tenuous but very real connection between the price of gold and the price other commodities, including consumables such as oil and gas. Their precipitous decline will surely herald downward pressure on gold, and given the apparently sustained strength in the dollar, $1,100 or even $1,050 gold looks likely within the next 30 to 45 days.
The reason this isn't happening yet (and hence the reason for the opportunity) is that while lower priced energy means lower priced gold, rapidly changing energy prices mean high stock market volatility, and many traders are still very much of a short-term mindset that equates stock market volatility with rising gold prices. Once the price of West Texas Intermediate crude oil settles (probably near $75 per barrel), world energy markets will settle, stock market volatility will return to the lows seen in late 2013 and early 2014, and money will stream rapidly out of metals.
The inversion of the prices of gold and platinum (to which I pointed 10 days ago as a selling signal) has not lasted, but the spread is still very narrow from a historical perspective, and the disruptive forces (speculative buying, in this case) which caused the short lived inversion are still very much in place.
So, to restate: these two factors taken together suggest that a great deal of the money that has recently gone into gold has come from the very short traders who make speculative plays based on the VIX and other indicators of volatility. The medium and long term trends for gold appear very bearish.
Julian Close has been a business writer since the first day of the twenty-first century, having written for PRA International and the United Nations Department of Peacekeeping. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. He became a stockbroker in 1993, but now works for Fresh Brewed Media and uses his powers only for good. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.