From Collin Kettell: Precious metals analyst David Skarica thinks that we are seeing pretty classic gold action. Gold stocks are normally more volatile when compared to the regular markets.
The U.S. system is currently very dysfunctional, nothing seems to get done, just like it was under Obama. Overall this will affect the psychology with the dollar.
The Canadian dollar and gold charts look very similar since these are tied to natural resources. The Canadian dollar improvements in recent weeks have caused Canadian mining stocks to move up in USD terms.
We still need some sort of catalyst, an external event, some small drop in the markets to get things started. People are going to be surprised how quickly gold heads for the all-time high.
US Dollar weakening has not driven a rally in gold, last year gold followed the trend, that seems to have stopped. One of the reasons for this is that the overall political climate in Europe has improved. If you look at the last six to nine months there has been a lot of capital flow into ETF’s. The overall markets have a mania psychology in things like tech stocks and crypto currencies. These things take away from resource equity inflows, it’s a good time to get deals on gold equities.
The trading pattern in the markets from the election till now is very similar to what took place in mid-1986-1987 and 2008-2009. We are in a bubble and close to some sort of blow off. If that happens gold equities may temporarily fall with the rest of the markets.
The SPDR Gold Trust ETF (NYSE:GLD) fell $0.35 (-0.3%) in premarket trading Thursday. Year-to-date, GLD has gained 7.73%, versus a 11.52% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of Palisade Research.