Wednesday's Market Minute: Gold Bugs Are On The Verge Of Extermination

The chart of gold is one of the worst-looking ones out there. It's been steadily declining since August, with a few periods of consolidation that eventually broke lower, meaning those sideways moves will likely act as resistance in the event of a gold rally. We saw that earlier this month as previous support between 1865 and 1875 became resistance as gold was swiftly rejected from crossing that mark. Today, gold is fighting to cross that boundary again, and struggling. If it gets rejected again, it would mark the third obvious lower high on the chart since August, and suggest gold is on its way to retest 1800. So, the technical take on gold right now is not a pretty one. Taking the fundamental story into context probably makes it worse.

The market and economy have bounced back and forth between a lot of narratives since August: economic strength, economic weakness, COVID lockdown, vaccine-driven victory, stimulus, no stimulus; equity market crashes and rallies, a surge in bitcoin, and varying degrees of rotation. Through all of this gold has effectively gone in one direction. It doesn't seem reactive to stimulus, bad data, or anything else is working for gold. There's an important message here for non-bugs too, though. Despite all the talk about how accommodative the Federal Reserve will be for investors going forward, the Fed's message is no longer resonating with gold bulls. That's likely largely due to the lack of inflation at this moment, but may also be a heads-up to other asset classes that the central bank isn't as big a force as we've gotten used to the last two years.

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