acting-man.com / By Pater Tenebrarum / January 9, 2013
Still Not Really Loved
The so-called ‘gold bugs’ in the wider sense are usually a quite vocal bunch. This may at times give the erroneous impression that gold is a ‘crowded trade‘, as in, widely participated in. However, that is not really the case if one considers the totality of investment assets and even less so if one compares the total amount of gold available for investment to the total amount of fiat money issued in the world.
Lately there has been quite a bit of negative sentiment expressed on an anecdotal basis, this is to say, it has been easier than usual to come across negative opinions in the press and mainstream banks and investment banks many of which began to love gold near its 2011 high have begun to cut back their target prices. Credit Suisse for instance calls it a “wounded bull” now.
Of course we must also stress again that gold isn’t the bargain anymore it once was. And yet, the fundamental backdrop has as of yet not become gold-unfriendly – we suspect rather on the contrary that it could become evenmore supportive for gold, although getting to that point may involve a few speed bumps. Since its 2011 high amid what has thus far been the peak of the euro area debt crisis, coinciding with a debt ceiling wrangle in the US, gold has been in a triangular consolidation. So far there has been neither a decisive breakout, nor a decisive breakdown, so from a technical perspective it remains in no-man’s land for now. It is interesting though that while the consolidation has dragged on, sentiment has mostly turned more cautious, especially as triangles are usually continuation formations.
Gold in dollar terms, weekly. The triangle continues to put everyone to sleep
In non-dollar currencies we note that gold in euro terms has failed with its breakout attempt in the fall of 2012, but if anything now looks short term oversold. In fact, on the daily chart the RSI has fallen to its lowest level in many years, but even the weekly chart reflects that now.