Gold prices have been showing weakness in the past couple of sessions. With gold prices down , despite what should be positive news for the reflation trade, and analysis from the likes of Bespoke showing that this kind of price action may be the start of a prolonged period of weakness, is it time for gold bulls to panic?
It's time to take a deep breath and watch what the rest of the commodity complex is doing. After all, commodity prices are the canaries in the inflation-deflation mine. The chart below shows the ratio of gold to the Reuters/Jeffries CRB Index of commodities. On a relative basis, gold has retreated but remain solidly in the middle of the trading range with other commodities.
How are commodity prices behaving? Looking at the chart below - just fine, thank you very much.
In fact, the point and figure chart of the CRB below shows that commodity prices have outrun their uptrend line!
This just looks like a short-term hiccup for bullion. Gold bulls should just relax. (This is one of the reasons why I remain a long-term commodity bull.)