What's happening in gold
Gold is at the highs of the day, up $11 to $1713 as the US dollar weakens across the board. The 0.6% rise boosts gold to the highest since Friday but in the big picture, the consoldation around $1700 continues.
The chart appears to be a bull flag but the idea here is to go with a break in either direction.
The fundamentals for gold are great but I worry about another downdraft if risk assets take a hit. Powell today is a big risk. There has been talk about negative rates and other Fed members have been trying to stamp that out but I worry the market has priced in a chance of it and that Powell will have to stamp it out.
In terms of a call, David Rosenberg is out today with a note saying his highest conviction call is to buy gold.
The only way we don't end up with more deflation is because localizing global supply chains, stagnant productivity and a higher government presence in the economy will impinge upon the aggregate supply curve. In fact, if you have a three- to five-year view, a strong case can be made that stagflation is going to emerge as a new secular theme once demand conditions stabilize. Either way, gold comes out a winner, and is my highest conviction call, if for no other reason than supply growth is pretty constant at about 1 per cent a year, whereas the production of the money supply right now is running at 30 per cent.
He joins Druckenmiller and Tudor Jones among others who are banging the drum for gold.