Gold and silver are down in Asia after having a bounce on Friday. It was a tough week for the gold bulls as gold had its worst weekly fall in a month. Even though the fear index has moved higher, gold is not reacting the way it should as a safe haven overall. I can possibly attribute this to the fact that deflationary forces are still in full effect and an overall stronger dollar play is still in effect despite short term pullbacks. Some view with the recent good GDP report that the Fed will raise rates come September.
This scenario is confirmed via a Bloomberg story today:
“With global growth concerns reemerging, we are seeing fears of deflation everywhere, and gold cannot do well in that kind of scenario,” said Jim Russell, a Cincinnati-based portfolio manager at Bahl & Gaynor Inc., which has about $14 billion under management and advisement. “Lack of follow through in gold given the price action in other assets did strike me as a big surprise. As for now, we are staying away from gold.”
Some commodities are showing strength of late led by oil which has pushed the commodities index up 1.8%, the report said. This oil rise will be followed by lower prices and this gold and silver bounce, if it continues, will be followed by lower prices. Not too many are talking deflation, especially those who sell gold. None of those who sell gold are dollar bullish, that’s for sure. I believe I stand alone on this. Yet since 2011, it hasn’t hurt my forecasting. I don't know why gold bulls ignore price action.
I still see the dollar as key, but have the many other indicators I follow. While supply is still thin, the phone wasn’t ringing as much this past week and that coincides with the decline in gold prices we had.
News may be what moves gold for the next two weeks as we wait for the all important Fed meeting come September. Expect fireworks!