As noted in the previous update, a steepening yield curve would be positive for gold. Beyond that, other macro considerations remain positive as well. But we are hurtling toward the noisiest and most vile election moment in US history. Stocks are bullish and rallying into the election (at least as of today) and it all appears to be swinging away from gold.
I don’t buy it on the bigger picture into 2021, but I will respect it on the smaller picture if the Gold/SPX ratio breaks down. Here we see daily Au/SPX once again poking through the SMA 200 and testing key support.
The weekly chart shows an intact situation. If the SMA 200 above is lost, I certainly would not rule out more hard grinding at the noted lateral support area. Nor would I rule out a breakdown to fill the (blue shaded) ‘fear gap’ down below .5. Think such a freak out can’t happen? Well, it can. Depending on what this election season brings to the happy stuff (stocks), the unhappy stuff (safe havens like gold) could suffer dramatically.
Please understand I am not calling anything. I don’t do that. I lay out possibilities and probabilities. If the ratio above loses its 200 day moving average the probability is for more hard grinding and an unthinkable (to the average perma-bug) drop to fill the fear of early 2020 is a possibility. So for now Au/SPX is intact, but it is on watch for a change of status now.
A fill of that gap would not kill the case for gold and the miners, but it would delay it. Here we recall that the metals and miners all hit or exceeded important targets in 2020. A hard correction of that would test the bugs’ spirits. If you remember back to the last bull market, such tests are almost traditional in this volatile sector.