Gold: Playing the $ bear

Not only has the US dollar embarked on a new bear market versus currencies, but the best way to play it is by selling dollars for gold. PBOC actions appear to confirm this view.

After gold’s dramatic run to $3500 on Tuesday, gold has backed off on profit-taking. This morning in European trade gold was $3300, down a net $25 from last Friday’s close and up 27% this year so far. Silver was $33.35, up 85 cents from last Friday and up 15% this year so far.

Early markdowns in both metals this morning coincide with China winding down for its weekend. Understandably, the shorts are grabbing the opportunity to shake out any flaky longs by triggering their stop-losses. But both metals are far from overbought on Comex, and gold’s open interest is not too far from rock bottom:

However, Comex and London are becoming less relevant. The reality is that pricing is moving away from western capital markets to Shanghai.

All too often Europe awakens to Asian trade having driven gold prices higher. This was particularly acute until President Trump backed off from attacking the Fed’s Jay Powell and from further tariff threats against China.