Gold Price Continues Upward Move
London (April 23) Our philosophical view is that real gold is real money. However, in today's financial system it is traded primarily as a paper derivative. One day, we believe that gold will be set free from its paper chains and leap in value. We can't predict the timing of the monetary reset that we see as inevitable; therefore, our strategy is to remain long precious metals while occasionally hedging downside risk. We write regular columns on the SPRD Gold Trust (NYSEARCA: GLD) and the iShares Silver Trust (NYSEARCA: SLV) which outline our week-ahead views and positioning.
The price of GLD is dependent upon the value of gold in the futures market. The futures market trades more hours than GLD, and at much greater dollar volumes. As a result, we view technical analysis of GLD to be inferior to technical analysis of the COMEX gold futures market.
Summary View
Gold experienced several downside spike trades in the last couple of weeks, which usually occurred near 10am EST, which just happens to be the time of the "London Fix." Every downward spike was matched with buying pressure, and gold finished this week near even from the prior week at just under $1290 per ounce. The prospect of military conflict with North Korea, along with the pending French election seemed to keep a bid for gold above its 8-day EMA. As happened after the Brexit vote and the recent U.S. election, we would expect to see volatility in the gold price as the French election returns come in. It is difficult to predict the impact of the French election on next week's price of gold. As a case in point, the "improbable" election of Donald Trump was supposed to be bullish for gold in the short run, and the opposite occurred. Anyone with significant exposure to precious metals will want to watch this closely. We hold a hedged long position, and won't be surprised to see a corrective "sell the news" reaction to the French election. On the other hand, any further tensions in North Korea or bad news about the U.S. debt ceiling discussion would likely add further risk premium to gold and safe havens.
Source: SeekingAlpha
