Gold has broken a critical support level with intra-day trade hitting $1,100/oz. Gold is also trading below key moving averages, with the 50dma below the 100 and the 100 below the 200.
The below chart illustrates how gold’s rise and fall has been correlated with China’s GDP growth (in US dollars). This weekend it was revealed that China’s gold reserves are half previous estimates. Future large Chinese gold purchases are unlikely with the implosion of their stock market and the unprecedented government intervention to shore up stock prices. I believe that China’s slowdown is responsible for the post-recession slump in commodity prices and could have an impact on US equities.
Time to buy the gold dip? I don’t think so. Read and listen to my previous comments on gold’s relationship to oil.
I remain long the US Dollar and short Oil.
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