When I wrote this post on the morning of May 30th I didn't envision that gold would rise ~$200 per ounce in the next two months. Two weeks later when I pounded the table that "It's Different This Time", gold was around $1340 and I wrote the following words:

"I think $1450 could end up looking like a conservative upside target in the intermediate-term (2-3 months)."

As I write these words December gold futures are trading at $1476 and spot gold is $1463. $1450 is indeed looking like a conservative upside target for the yellow metal. However, I find myself wondering what's next? 

One of the better sentiment gauges for gold, the Daily Sentiment Index (DSI), was at 91 as of Friday's close. After today's gold euphoria the DSI is probably going to be up to 94 or 95. I am confident in saying that as of today bullish sentiment on gold is the highest it has been in 2019, as price moves up to the highest levels since April 2013:

Gold (Weekly)

The long term bottom in the gold chart is impressive and the current upside breakout is 6+ years in the making. I am as bullish as i've ever been on the long term outlook for gold, but there is some cause for caution in the near term. There is a thick layer of resistance between $1525 and $1550 (previous support) from the 2011-2013 time period. I don't expect this area to be breached easily or quickly. With gold currently sitting roughly 4% below this long term resistance, and the next area of significant support down between $1400 and $1420 - in the short term (1-2 weeks) risk/reward is no longer favorable from the long side in gold. 

My purpose in writing this post is not to encourage anyone to change their long term investing thesis or positioning. However, it is to point out that things are quite a bit different from how they were on the morning of May 30th when gold was $1280 and nobody cared about it. Sentiment has a magical way of following price and the gold price has been rising since the end of May. The herd is starting to catch wind of all the reasons why it might be a good idea to own some gold. 

We are seeing stuff that has never happened before across global markets including a record amount of negative-yielding debt and plunging US Treasury yields. In the bigger picture all of this is supportive of the long term bull market in gold, however, in the shorter term market movements tend to be whimsical and based on the emotions of fear and greed. Right now the fears around an escalating US/China trade war have contributed to a strong bid in gold as well as Bitcoin, which are perceived to be safe haven assets in which wealthy Chinese can park some of their wealth. 

It really is different this time. While things are happening around the world that have never happened before, the emotions of fear and greed have not changed and you can be sure that some of the fear based moves we've seen across markets in the last week will give way to greed and mean reversion. 


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