The bottom line is today's apparent gold-inflation disconnect is a temporary unsustainable anomaly. Gold powered higher on balance like normal during the first year of this inflation super-spike. But a few months ago, the US dollar started shooting parabolic on incredible Fed hawkishness. That spawned heavy gold-futures selling, hammering gold into a serious technical breakdown. But both extremes are exhausting.
The extraordinarily-overbought, euphoric, and wildly-overcrowded long-dollar trade is overdue to reverse sharply. And speculators' capital firepower to sell gold futures is largely tapped-out based on multi-year trends. So when the USDX inevitably rolls over on a less-hawkish Fed or more-hawkish ECB, gold will soar on massive mean-reversion gold-futures buying. That will attract back investors, accelerating the upside.
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Jul 15, 2022
Adam Hamilton, CPA