Gold is still performing like a risk asset, rallying as equities and and commodities rebound today, getting an assist from last night’s strong Australian data.
But it should be rallying on uncertainty surrounding sovereign debt. At best, EU support for Greece (without any money changing hands) postpones the day of reckoning for Europe’s unbalanced monetary union. At worst, it saddles German with a load of fresh obligations reminiscent of the early 1990s when reunification left the Germany with a huge new liability.
If the US, UK and now Germany are sucked into a bigger debt hole, gold will be the safe-harbor of choice, by default. There just are no good options.
$1113 is next resistance of note for gold, the 38.2% retracement of the $1225/$1044 drop. We trade now at $1095.
