The shiny yellow metal continues to base above previous all-time highs of 1,028. The consolidation looks healthy and controlled within the confines of a descending channel roughly $75 wide. I have long been interested in gold and have actively traded it with a long bias for months. Lately, trading has clearly not been as profitable as the sell-off in late December has led to months of back-and-forth action with no clear direction. My size has been light and I've dabbled here and there but no trend trade has materialized yet. I don't think there is much of a trade until gold clears $1,125 on the upside. At that point I will put on some longs and see if the long-term uptrend is taken up again.
The catalysts for gold to trade higher just haven't been sustained. Early last year gold offered the safety play while later fears of inflation cropped up everywhere. A weak dollar in later 2009 offered strong negative correlations for a while. But, the data have yet to support the high inflation thesis as the Fed is still battling deflationary pressures. Gold has effectively decoupled with the dollar and has been consolidating while the dollar has mounted a strong rally off lows. It is strong and looking good, just awaiting a catalyst.
Disclosure: No relevant positions.
