Let me first note that I am a trader. I believe strongly in the long-term fundamentals for gold and am sympathetic to the political reasons for owning it as well. However, I am primarily in it to make money - in the short-term and the long-term. If there is any point where I think I can make more in another asset, I will sell my gold in a heartbeat (not ALL of it, though) and reinvest elsewhere. Thus, what you will get from me is more of a trader's perspective.
What I would like to share with you today is my monthly gold chart book, which is a summary of some of the fundamental and statistical data I track in helping me understand what is moving gold and where it may be going both in the short-term and the long-term. Many of the charts you have likely seen before, but there's probably also a few that you have not. I must warn you that my approach is highly structured and analytical, and that tends to bore people. But I will throw it up here and see if it interests you. If so, please let me know - if not, please let me know that too and I won't waste anyone's time putting it up again.
The complete report has been posted to Scribd and is embedded below. But here's a few of my conclusions:
§ Gold prices rallied sharply in July, gaining 8.6%. The remarkable performance was due to a previously oversold condition in May, a sharp reversal in speculative positions and strong physical demand. This all was driven by safe haven flows resulting from dual sovereign debt crises in the US and Europe and emerging signs of a severe economic slowdown on the horizon.
§ However, gold’s high premium to its 40-week moving average and the elevated bullish positioning of futures traders suggest an increased risk of a material correction. Consistent with the correlation data, any resolution (short-term or otherwise) of the debt crises is likely to lead to a decline in prices.
§ Nevertheless, the macroeconomic and geopolitical trends driving the long-term gold bull market remain firmly in place. Furthermore, the price of gold relative to monetary aggregates and government debt remains well below historical levels. Thus, any pullback in prices would represent a much needed opportunity to add to positions.