All seemed rather quiet on the Western front. Gold was pushing up against the 58 level, hovering in a tight range. And then, Boom! We ripped through the day's high of 1761.7, and through resistance at 1767. While we settled 1771.3, we went on to make a high of 1783.4. I had commented in the past that while 1763 and 1767 seemed to be the numbers in everyone's sights, that 1750 was really the important level. Yesterday's break through and settle above may have been the re-emergence of a bull market in gold.
While we can talk about technical levels all we want, the far more important story is gold's performance in light of that of other asset classes. Yesterday, after it became clear that the European weapon of choice to deal with Greece was bailout, and not default, one would expect the equity markets to rally. They didn't. But gold took off, up over 30 dollars at its peak. And today, when gold began its rally, The S&Ps were down 5 handles. When gold was 22 dollars higher, the S&Ps were 2 handles higher.
As we began rallying, I scrambled to see if there was any news. But there wasn't. As anyone who watches gold will tell you, these moves (QE and Fed minutes aside) are usually less news driven, and more a product of something we're probably all unaware of. One could make the compelling academic argument that a Greek bailout is the nail in the coffin for fiat money maintaining its value over the next few years. But I won't bother. While I believe everyone who "waits for pullbacks" will be kicking themselves in a year or two, the fundamental reason behind the story matters less. Someone is buying gold, and there is just too much short term momentum for short sellers to stomach the risk. Don't think because we've rallied that we are out of steam. This bull still has a long way to run.
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