"FYI this article is in line with your view I believe: gold equities at current level present interesting opportunities (low downside risks)."

David Fuller's view Thanks for the link to an interesting article.

Gold bullion has shown incredible relative strength over the last decade, including last month's surge to new highs. However that can only bring it closer to the next medium-term peak, just like the price of any other asset. We should always remember that any investment will have an increased downside risk once the investment fashion changes.

In the short term, gold remains overextended relative to its 200-day moving average which is a reasonable approximation of the medium-term trend, in our view. Previous overextensions of this magnitude have been followed by mean reversions in the past, as we have often mentioned and as you can see on this 10-year simi-log chart.

Today, with additional capitulation selling occurring in stock markets, we have seen this spread to precious metals for the first time in a while. During a deleveraging process most high-flying assets eventually succumb to profit taking.

The US dollar has also strengthened recently, once again indicating that it has become a temporary haven during a crisis. A dollar rally, while it lasts, can only be a headwind for precious metals and other commodities which are mainly priced in USD.

While cautious in the short term, Fullermoney remains bullish of precious metals over the medium to longer term. Gold shares remain attractively valued relative to bullion but are thinly capitalised and can be exceptionally volatile.