December Gold has had no real reason to rally from a fundamental or technical perspective. The first and most obvious reason for gold’s continued weakness is a much stronger (and today is no exception) US Dollar Index. As of today, the front month dollar index has made a new high and shows no signs of slowing down. The fed continues to take a more hawkish rhetoric and four rate hikes is getting closer and closer to becoming a sure thing. The CPI number out today was in line with expectations at .2% and remains at a 6.5 year high. Inflation is still likely to remain strong with a tight labor market and an upside breakout in wage growth likely being the result, cementing a fourth rate hike in December. One longer term reason to be a buyer of gold is the yield curve which many in the financial markets are talking about. Before every major recession the yield curve between the longer term and shorter-term government loans starts to flip with shorter term loans yielding more than longer term loans, and it’s approaching an inversion once more. It’s something to keep an eye on that would change the tone for gold.
Gold technicals don’t look any better if you are bullish. The stair step pattern down is nothing new, with the first bear flag forming from May 1 to May 11 of this year, followed by a sharp move lower. I would look at gold as a trader and think that if 1200 doesn’t hold (and I don’t think it will) that a washout down around 1150 is surely possible before buyers of value step in and start to bid prices up.
Gold Dec ’18 Daily Chart