Gold In A Goldilocks Scenario

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Includes: CADS, EURS, FXA, FXC, FXE, FXY, GDX, GDXJ, GLD, GLDI, GLDW, GOLDX, JNUG, NUGT, NZDS, SIL, SLV
by: Rigel Mercantile Limited
Summary

Both fundamental and technical factors are aligning up for the ascent of Aurum.

As per the World Gold Council, while the total supply of gold declined 8% YoY, most forms of demand, viz. jewelry, bar & coin, central bank, technology, were up YoY.

Gold is trending up against all major fiat currencies and a technical breakout seems to be in the making.

In our previous write up on Gold (GLD, GOLDX, GLDI, GLDW) and Gold miners (GDX, GDXJ, NUGT, JNUG): The Ascent of Aurum - Long Gold, we wrote a bullish thesis that rested on the following factors:

  1. Declining global mine production in years to come - a result of past, massive, haircuts to capex by some of the largest gold miners around the world. Gold miners' Capex has declined 65% from 2012 to 2016.
  2. Gold is a safe haven asset and according to the World Gold Council's most recent report on demand trends, current uncertainties in China and Europe are driving these flows.
  3. Technical analysis of gold price chart reveals a strong bullish set-up at a time when this trade is far from being crowded.

In the attached presentation, we review our thesis and present both fundamental and technical evidence to convince any gold bears out there to get out of the way. We look at gold not just in US dollar terms but also against most major currencies (FXE, EURS, FXC, CADS, NZDS, FXA, FXY) and against gold's peer: silver (SLV, SIL).

We hope you enjoy the charts, we look forward to your comments.

Disclaimer: Rigel Mercantile Limited specializes in Macro/Value Research and Systematic Trading. The views expressed above are our discretionary ideas that we have arrived at using discretionary analysis and, therefore, are limited to our discretionary portfolios only. Our systematic strategies may or may not have a position (long or short) in the securities mentioned above. Under no circumstances should the information contained herein be used or considered as an offer to sell, or a solicitation of an offer to purchase, any security or investment service. The information presented herein is presented in summary form and is, therefore, subject to qualification and further explanation.

Disclosure: I am/we are long GOLD COINS, GDXJ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.