Global Macro Commentary

The 7-month triangle formation is finally coming to an end, and a breakout seems imminent. I had been cautious to factor in seasonality for precious metals, but it looks like the deflationists are the ones that are still on the beach (and caught with their pants down). A positive payroll tomorrow would be helpful.

I acknowledge that gold has underperformed most of its commodities siblings since the bailout/stimulus fueled recovery (the “Great Recovery”) began, but one must understand the dual role of gold ytd. Although it seemed like a noisy ride, the gold chart below neatly summarizes overall market sentiment ytd through the eyes of gold.

- Until late-February, gold rallied to $1,000 as a safe haven (along with the dollar and treas); this was not the propoer launching pad for four-digit gold.
- Until mid-April, gold sold off as capital rotated back into equities (even as the Fed announced QE); this marked the end of gold’s role as a safe haven and the start of the Great Recovery (also the last oppotunity to buy gold under $900).
- Until early-June, gold rallied as renewed risk-taking lifted inflation expectations; this marks the rebirth of gold as the anti-fiat currency.
- Until early-July, gold sold off to $900 as the government became more hawkish (and prematurely/foolishly announced plans to withdraw bailout facilities and raise interest rates) and the Great Recovery came into doubt; this marks the last oppotunity to buy gold before launching into four-digit territory.

News flash: Bank of England boosts QE; this should be positive for PM.