Tuesday, February 16, 2016

#Gold Enters Causing Building #CycleofAccumulationDistribution

Just because gold is rallying in US dollars, it doesn't mean investors have lost confidence in central banks, leadership, and/or the dollar-centric financial system. A rally in gold and decline US Treasuries (TLT), German bunds (BUNL), and the Euro (FXE), a pairing yet to be observed for an extended period, defines investors losing faith (chart 1). Today's rally, through profitable, is just a countertrend rally against the long-term down impulse. See latest Review of Gold for further discussion.

Gold, a proxy for confidence in those leading government and economies, will most likely remain cause building throughout most if not all of 2016. While causing building is not liftoff, it's an important phase within cycle of accumulation and distribution. Liftoff, a gold rally against all currencies that jumps the creek, likely waits until 2017 (chart 2).

Chart 1: Gold, US Treasuries (TLT), German Bunds (BUNL), and Euro (FXE

Chart 2: Gold price in all currencies

Headline: Streetwise: Markets Putting Faith in QE4?

Since the medieval church clamped down on the sale of indulgences, it has been hard to put a price on religious faith. Not so with central banks. The value of trust in the world’s leading policy makers is calculated second by second, and stood at about $1,209 an ounce on Monday.

The gold price is far from a perfect measure of belief—or lack of it—in policy makers. But its 14% rise supports one popular explanation for this year’s...



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