The first is the trend of the 10 year note. I thought the low yields were in a few weeks ago only to have that smacked in my face as the 10 year and Treasury Note curve moved lower rather aggressively. As this is written, the 10 year is sitting around 4.68% and hit the 4.66% which just happens to be previous highs of the 10 year run late last year. This signifies to me that while we are lower at the moment, the path is still for higher yields. This is one support for Gold.
As for the other confirming sector, the Russell 2000 (IWM) remains stalled at the previous highs and is finding formidable support near the 775 level. A breakout from this level would help the overall equity markets accelerate in addition to the gold market. However, at the moment, that has not occurred. Furthermore, the buying pressure for the RUT has not broken back into positive territory. Finally, the weekly chart looks somewhat threatening for the bulls and enticing for the bears.
So at the moment, I have a treasury market that really does not want to rally (though I believe the trend is higher) and an index that seems to be stuck in the mud with only the value side rallying. This is not confirmation which makes the current move in the gold market less than super bullish. In looking at the streetTRACKS Gold Trust (GLD), which has volume information and thus allows me to use my power model, the picture looks better though not bullish enough to call a major breakout.
One variable I forgot to mention that makes this whole scenario work? A stronger dollar. If the dollar collapses or starts a prolonged downtrend, I will have to reassess this confirmation scenario. So with that said, barring a weak dollar, I am looking for confirmation from the Russell and the 10 year before getting bullish on Gold.
GLD 1-yr chart: