The Synthetic Systems forecast posted at the beginning of the quarter expected a weak performance from gold. And we haven’t been disappointed. The past couple of days, however, gold has been taken out and shot. Then the lifeless carcass was dragged up, nailed to a post, and shot again. Cousin silver has taken even more abuse. Gold and silver had disproportionately benefitted from the flight from dollars over the summer. Commodity investors’ attention has since turned to more industrial commodities like copper, platinum, and most conspicuously, oil. Oil has burst aflame, sucking the financial oxygen from the commodity room.
Could it have gotten a little overdone? I think so. Short term moves are notoriously tricky to call, but investors who were looking for an opportunity to add to positions in gold and silver anyway might find this an attractive point to do so. My indicators show gold and silver particularly oversold in relation to stocks amid markets giddy with enthusiasm for the reopening trade. On a longer term basis oil is still at depressed levels and has more room to run, but the anti-gold-rush crowd has overplayed its hand. A tradable low is nigh.