Gold slump resumes

Once again, it was good economic news from the U.S. that pushed gold down. After November retail sales, consumer-sentiment and inventory-level data were higher than expected, gold hit a more than three-hour slide that took its price down more than US$30/oz. Spot gold bottomed t just below $1,110 at about 11:30 AM ET yesterday. The rest of the trading week was relatively quiescent, with the decline halted but no recovery in sight; spot gold ended at $1,115.10. The pause on Thursday proved to be a mere interruption of the continuing short-term downtrend.

Interestingly, oil also dropped - counterintuitively, given that oil should rise when better-than-expected economic data hints at higher future demand for petroleum products. Both drops share one common cause: the recovery of the U.S. dollar.


I myself didn't see that drop coming. As always, technical analysis is trumped by changing fundamentals - in this case, the rising greenback. We're seeing a discounting of a future rise in the Fed funds rate; we might even be seeing a discreet unwinding of the U.S. dollar carry trade.

At any rate, the positive correlation between gold and U.S. stocks is still eroding near-term.