The Macro Strategist team was largely skeptical of gold's sharp, dramatic rally in late 2018. It's not that we didn't understand why gold prices were rallying, but we significantly questioned the momentum and conviction of the move.
We began analyzing the volume of the move (Yes, volume matters), and noticed that total monthly volume was declining. Not a positive under the conviction category. Then, we noticed the 7-month volume rate-of-change turn sharply lower in January.
On Jan. 18, we wrote:
"In "Charts to Ponder," gold's pricing proxy is hindered as a monthly volume anomaly has appeared for the first time since 2012. Monthly volume is near two standard deviations below the mean, suggesting that if volume mean reverts it could cause a staggering move in price.
Two things need to be present for a sustainable rally in gold: dramatically falling real yields and volume confirmation.
Sentiment remains neutral while core subscribers will receive TACVOL ranges for GLD, and premium subscribers receive additional ranges of gold miners."
We got dramatically lower - albeit still positive real yields - but no volume confirmation. In fact, the monthly volume began heading into negative standard deviation territory during the beginning of the move in Oct while total volume is still positive. March and April's volume exceeded -2 deviations from the mean.
Since the top in February, total monthly has increasingly become more bearish and volume mean reversion is beginning since coming off March and April's low. Volume is beginning to confirm the downward bias of gold prices, and we thing the move is just starting.
Our, now free, Macro Brief "Are We On The Precipice Of A Dollar Breakout" is likely to confirm our previous view on gold.
We have continuously pointed out the links between the USDCNY, USDHKD, gold and the DXY; and the dollar monthly chart is looking to smash expectations and reach triple digits.
We began analyzing the volume of the move (Yes, volume matters), and noticed that total monthly volume was declining. Not a positive under the conviction category. Then, we noticed the 7-month volume rate-of-change turn sharply lower in January.
On Jan. 18, we wrote:
"In "Charts to Ponder," gold's pricing proxy is hindered as a monthly volume anomaly has appeared for the first time since 2012. Monthly volume is near two standard deviations below the mean, suggesting that if volume mean reverts it could cause a staggering move in price.
Two things need to be present for a sustainable rally in gold: dramatically falling real yields and volume confirmation.
Sentiment remains neutral while core subscribers will receive TACVOL ranges for GLD, and premium subscribers receive additional ranges of gold miners."
We got dramatically lower - albeit still positive real yields - but no volume confirmation. In fact, the monthly volume began heading into negative standard deviation territory during the beginning of the move in Oct while total volume is still positive. March and April's volume exceeded -2 deviations from the mean.
Since the top in February, total monthly has increasingly become more bearish and volume mean reversion is beginning since coming off March and April's low. Volume is beginning to confirm the downward bias of gold prices, and we thing the move is just starting.
Our, now free, Macro Brief "Are We On The Precipice Of A Dollar Breakout" is likely to confirm our previous view on gold.
We have continuously pointed out the links between the USDCNY, USDHKD, gold and the DXY; and the dollar monthly chart is looking to smash expectations and reach triple digits.