What Is The Gold Market Telling
The price of gold peaked at $1,762
on a monthly average basis in September 2011. Since
then, the market has tried and failed three times
to move beyond that high watermark, prompting many
to throw in the... towel, and proclaim the end of
the 12 year old bull market.
The last push
to the upside coincided with the third round of
quantitative easing in September 2012. But instead
of rising to the occasion as we saw consistently
with each QE handout, the gold market seemed to
signal that enough was enough, as it ignored the
charitable gift and abruptly headed south. Even
the 4th round of QE failed to resuscitate the recalcitrant
bulls, as gold fell for ten consecutive months through
By our reckoning, this was the
longest losing streak since 1981 when the market
fell 40% over a similar 10 month period, to include
a record 37% year over year loss in July 1981. Further,
with the monthly average price falling to $1,286
this past July, we are looking at a record $307
year over year loss, and representing a near 20%
drop since last July.
Coincident with, or
contributing to the overall decline in gold, the
US dollar has strengthened considerably, with double
digit percentage gains posted against most other
major currencies, with the exception of the Euro.
So the question is, are we 1) Seeing the gold
market moving higher during August in response to
Middle East tensions, or 2) Is it simply a long
overdue technical correction that accompanies a
market that has moved too far, too fast ?
Long-term historical patterns suggest that the
overall downtrend will persist, with still lower
prices on the horizon. Conversely, if the monthly
average price can manage to get back over resistance
at the $1,600 level, it will then pose a challenge
to the previous highs and reflect a heightened level
of uncertainty for the global economy overall.
John Gross is President
of J.E. Gross & Co., Inc, a
and consultancy firm established in 1987. Mr. Gross
is also publisher of
The Copper Journal, a comprehensive
summary of metal price charts and statistics..
In addition to his consulting activities, Mr.
Gross has worked with global leaders in the metals
industry over the past thirty-five years.
John began his career in metals in 1973 when
he joined U.S. Metals Refining Company, a division
of Amax Inc., where he rose to become Manager of
In 1981 he joined Hudson
Bay Mining and Smelting as Manager of Trading and
in 1983 became a Futures Broker with Johnson Matthey,
specializing in metals on Comex and the London Metal
He joined BICC Cables Corporation
in 1985, now owned by General Cable, where he became
Vice President of Strategic Metals for their North
American operations. More recently, Mr. Gross was
Director of Metals Management with Scott Brass,
a producer and manufacturer of copper and brass
John is a graduate of Hofstra
University in New York. He has held memberships
in several trade organizations; was a Director of
the American Copper Council, and served as a member
of the Comex Advisory Committee. Mr. Gross is very
active in industry affairs, and has written extensively
on the metal markets, industry issues.