Friday’s action in the US market showed investors are indeed still willing to pay for gold. After dropping for almost 2 straight weeks, gold found support at 114 in GLD money. Now the big question is whether that will hold when the Fed raises rates this week. Well, the Fed is at least “very expected” to raise rates. The Gold Enthusiast estimates the probability at 99% – because you can’t be completely sure about anything other than a Mike Tyson punch is gonna hurt.
As the 3 month chart shows, gold was stair-stepping up during the first 2 months of 2017. Going into the end of February “something happened” which caused gold to lose traction and fall about 5%. Now, two things to note about this.
First, 5% isn’t enough for a full-blooded “correction”, which requires 10% according to standard rules. So gold, while looking weakened, isn’t anywhere near a danger point quite yet.
Second, the stair-stepping up is indicative of some real internal strength. Unless you live in a fairy tale, life isn’t a straight-line thing for very long. Corrections, shakeouts, and pops are all part of a healthy market. The market isn’t the real world after all, it is a collection of reactions to the real world all smashed together. So when people “suddenly discover” something, there are quick blips in price. Both on the upside and the downside.