by Jordan Roy-Byrne, CMT
The Daily Gold
Gold and gold stocks have stabilized after forming a short-term low and even held up well while the US$ index pushed to an 8-month high. Conventional wisdom would tell us with the US$ index nearing a major breakout, Gold and gold stocks would be vulnerable to further losses. However, many astute analysts and traders believe that Gold and the US$ index can rise together and we note that the trend in the US$ index while important, is not the primary driver of Gold. Ultimately, as long as Gold’s fundamental driver, declining or negative real rates remain in place, then the fledgling bull market will remain on track.
First, take a look at what I like to call my master chart for Gold’s fundamentals. We plot Gold, the real fed funds rate and the real 5-year yield. We highlight the major bear markets in Gold which occurred when real rates were rising or were strongly positive. Since the middle of 2015 real rates have declined and that explains the sustained recovery in Gold this year.