by Adam Hamilton
Gold’s young bull market has totally stalled out in the past couple months. This major loss of momentum following gold’s powerful surges in 2016’s first half is really souring sentiment and vexing traders. They are trying to figure out if gold’s recent consolidation drift is the dawn of a new bearish trend or a healthy pause within an ongoing bull. The likely answer comes from understanding what’s causing gold’s high consolidation.
Back in mid-December right after the Fed’s first rate hike in 9.5 years, gold slumped to a miserable new 6.1-year secular low. That was driven by heavy gold-futures selling from speculators, who were utterly convinced higher rates are gold’s mortal nemesis. But with bearishness so extraordinary and investors’ gold allocations so low, a mighty mean reversion higher for gold was very likely in 2016 as I wrote in late December.