Gold continues to demonstrate impressive weakness. Again this week, gold was unable to mount a bounce, closing at $1160, which may be providing temporary support. The RSI continues in over-sold territory, and the MACD is struggling, but so far failing, to make a bullish cross-over (chart below).

The on-going weakness in gold, highlights the importance of the USD/JPY pair, treasury rates, and the dollar as the main driving forces of gold. And when you consider the size of these markets in comparison to that of gold, the theory that the gold price is being manipulated down is revealed to be nothing more than a “tail-wags-dog” story. Funny how the gold-bugs never cry manipulation on the way up!

The USD/JPY pair continues to show strength and potential for more appreciation (chart below).

The impressive rally in rates and the dollar, is being reflected in the declining price of gold (chart below).

Seven of the last eight local minima in the price of gold have coincided with the small speculators being totally out of the market (zero net position) or net short a few thousand contracts, and with the large speculators and commercial traders each holding less than 80K net contracts, long and short respectively. As of December 6, 2016, the small speculators hold 19K net long contracts, the large speculators are still long 136K net contracts, and the commercials are short 155K contracts. The speculators still have some hope, which means more downside is likely before they throw in the towel and signal a bottom (chart below).

In conclusion, the fact that gold has been unable to mount any kind bounce in price, increases the likely-hood of further price depreciation. The gold-bugs are still ‘buying the dip, so the price of gold will continue its slide until they finally give up and capitulate. That, will mark the bottom.

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Forty years of private equity trading, and still learning.

Forty years of private equity trading, and still learning.