Gold is being overlooked as central bankers prop up bond and stock markets with near-zero interest rates and bond purchases, according to Elliott Management’s Paul Singer.

“Weaker Chinese data has given gold a lift,” Jonathan Butler, a precious metals strategist at Mitsubishi Corp. in London, said by phone. “Indicators in China are trending towards outright deflation, which raises the potential for further stimulus and should be positive for gold.”
The odds of a rate liftoff in December are 29 percent, and the chances for a move in March are 50 percent, Fed-fund futures data show.

Holdings in gold-backed exchange-traded products climbed for a third straight day as of Tuesday. Assets rose to 1,530.18 metric tons, data compiled by Bloomberg show.

Eoin Treacy's view

There are a number of competing arguments focused on the gold market but let us consider what is in my view the most relevant. Gold was remonetised in the eyes of investors during the bull market which coincided with a lengthy downtrend for the US Dollar against a large basket of currencies. During that time gold did best when it was appreciating against most currencies, in other words when it was among the strongest currencies in the world. 

The large correction in commodity related and Asian currencies has meant gold outperformed when redenominated into those currencies. Gold prices were not immune from the Dollar’s strength earlier this year but since the metal cannot simply be printed into existence it held its value against weaker currencies. The prospect of the Dollar breaking down against the Euro has contributed to renewed interest in gold, now as a potential hedge to the greenback. 

Gold is now trading back above the 200-day MA, not for the first time, and will need to hold majority of the short-term advance to demonstrate a return to demand dominance beyond short-term steadying. 

Silver is also looking constructive and will need to hold the $15.50 area if potential for additional upside is to be given the benefit of the doubt.