Gold: The Bigger Picture Doesn’t Look Good

by James Brumley | April 1, 2013 7:00 am

When all was said and done, Q1 wasn’t good for gold.

The precious metal lost 4.8% of its value between the end of 2012 and the end of March — the second consecutive losing quarter. Indeed, between Q4’s loss and Q1’s loss, gold has fallen more than 10% over the past six months, which is the worst half-year stretch gold has seen since 1999.


Yet, even with the strong selling, gold has yet to move under the key figure of $1,540 (per ounce). Until that happens, gold still has a decent chance at recovering and resuming its long-term rally.

So what’s next for gold? To understand where a commodity is going, we have to get a grip on why it has been where it has been.

What’s Working for Gold?

The number of forces working in gold’s favor is shrinking, although the two key items left on this list are biggies.

What’s Working Against Gold?

While trouble in Europe and gold-fever are working hard to prop gold up, they’re losing that battle to more (and more meaningful) factors undermining strong gold prices.


What’s Next for Gold?

Weighing the bullish and bearish pressures, there’s only one reasonable conclusion here: Gold still is under attack, and due for more downside.

That’s not to say we won’t see short-term bullish swings for gold. We will — knee-jerk emotional reactions can temporarily hijack any chart. And, until the support at $1,540 is broken, any bearish forecast for gold is moot.

The bigger-picture undertow, however, is working against the precious metal, and it’s only a matter of time before those pressures take a measurable toll.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities, nor any gold-related instrument.

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