Gold: The Untouchable Asset Defying Gravity
Gold - will it?
Gold continues trading like a cork in water, basically immune to everything. The shiny metal is attempting to take out big resistance levels as of writing. It has not closed here or higher. Note how perfect it continues bouncing on the 21 day moving average (50 day some $100 lower).
Source: Refinitiv
Close up
Gold's perfect trend channel since the summer. A close slightly higher and this risks squeezing above the psychological $2700 area quickly.
Source: Refinitiv
Gold's rates connection
Gold managed trading relatively well bid, even when the 10 year went from 3.65% to 4.1%. What happens if rates start moving below 4% again? Chart shows gold vs US 10 year (inverted).
Source: Refinitiv
Gold and the dollar
Gold has refused easing despite the massive dollar move over the past weeks. Gold simply does not care. We saw a similar (but longer) set up earlier this year, when gold refused "reacting" to the dollar strength. The shiny metal took off when the dollar reversed some of the bull move.
Source: Refinitiv
Gold(en) volatility
Gold volatility trades with an upside skew due to gold's "natural" hedge logic. Bigger moves higher in gold are usually accompanied with gold volatility spiking as well. We have not seen this during the most recent move higher. Playing possible further gold upside from here via options is attractive.
Source: Refinitiv
Black vs yellow gold and tails
Oil upside tail has seen a huge increase, while gold has remained much more calm.
Source: GS
Gold as an asset
Total gold holdings still not overly exuberant as a ratio to funds AUM.
Source: UBS
The diversifier
"There is plenty of investor interest to hold gold as a portfolio diversifier in this environment of monetary policy easing not just by the Fed, but by other central banks as well. Now that the Fed’s easing cycle is underway, we expect investors to start increasing gold positions as the cost of carry continues to decline. Although part of gold's strength this year reflected the anticipation of Fed easing, we expect the market to continue its uptrend as the cutting cycle continues. Historically, gold gained on average over the next 3 quarters after the first Fed cut." (UBS)
