Last week the 2016 bull market in Gold and Gold stocks had gone off course. It had moved too far out of the historical boundaries to remain a bull market. There was also other evidence of such, including but not limited to rising real yields. Gold’s last hope was to hold $1200-$1210 and rebound back to the highs. It has broken bull market support ($1200-$1210 and $1230) and could be on its way to $1050 in the next few months.
Gold is down 7.4% on the month and has sliced through the important support at $1200-$1210 as well as the 20-month moving average at $1201 and the 40-month moving average at $1231. The 40-month moving average has been an excellent primary trend indicator throughout Gold’s history. There is a little support at $1150 but nothing standing in the way of Gold heading for a retest of its low at $1050.
Gold is not only weak in nominal terms or US dollar terms but it is showing weakness in real terms. Below we plot Gold against foreign currencies (the US dollar basket) and the NYSE, a broad equity index. Gold/FC has been strong for several years but it has lost support and looks headed lower. Meanwhile, Gold/NYSE lost support at its 400-day moving average and could retest its 2015 low.