We’ve been short gold (GLD) since April and have since added to the position, which has so far worked out well for us.

 
The precious metal is now at a major inflection point. It recently broke below its 5-year inverted H&S pattern (chart below is a monthly). If it doesn’t reverse here then that’ll spell big technical trouble for the barbarous relic.

 
I think this is the most exciting chart in macro right now. This is because gold is often a tell for the other major macro instruments; meaning it has a tendency to lead the dollar, rates, and relative US vs. ROW outperformance.

 
Gold is interesting because it acts as a barometer of global relative demand for $1 USD in earnings. This means that gold rises when investors would rather hold foreign assets relative to US assets and gold does poorly when US investors are willing to pay a higher premium for USD assets.

 
We can see this relationship in the relative equity momentum between US and EM stocks. When US stocks outperform, gold falls. And vice-versa when EM stocks outperform.

 
And since we still believe that US markets will outperform EM into the end of the year it then makes sense to be short gold.

 
The next two weeks will be decisive. Either gold reverses hard and we liquidate our position (and perhaps go long) or gold consolidates before another major break lower below its 200-week moving average (blue line). If that happens then it’ll probably fall all the way to its next major support at $1,100.

Thanks!

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