Cautious Bulls

Over at Minyanville, gold bull Przemyslaw Radomski has written an analysis of gold whose conclusion is becoming more common amongst his fellow bulls: the long-term trend is intact, but the near-term deline has a ways to go. His case, based on technical analysis, hinges upon a near-term bearish reading of the U.S. stock market and the oft-noted positive correlation between gold and U.S. stocks. The first part of his article reviews the state of the gold market at the beginning of the current bull.


There's a certain wryness for me in the comparison of the U.S. stock market to gold. Traditionally, that relationship has held true for the Canadian stock indices...because there's more than a few gold stocks listed on Canadian exchanges. The correlation vis-a-vis the U.S. averages is, of course, more abstract in the mechanics.


Another analysis, from Andrew Butler at Seeking Alpha, looks at the oil/gold correlation and why it's gone out of whack in the last couple of years. He attributes oil getting ahead of gold last year to a now-popped bubble in the former, and gold getting ahead of oil because of ETF buying.


Thankfully for gold bulls, ETF demand looks solid as of now. However, ETF selling could add a lot of downward pressure on the price if a plummet convinces some big holders that the bull run is over.