By TheMarkeEar | Source

Gold continues the bounce (outlined here). We took out the $4100 resistance easily, but are now at the $4200 resistance. Let’s see how this develops, but a “proper” close above $4200 and ATHs could come into play. Note that RSI still isn’t very overbought, despite gold having bounced some $300 from recent lows.

Source: LSEG Workspace

Gold(en) volatility

Gold trades with an “upside skew” when it comes to volatility, i.e gold higher is usually accompanied with gold volatility moving higher. Earlier this week (here) we pointed out “…playing possible further upside via gold options is much more attractive at these levels compared to the past weeks”. Note the surge in GVZ over the past sessions. Make sure to roll those options dynamically in order to max out the “options juice”.

Source: LSEG Workspace

Watching the dollar closely

Gold and DXY (inverted) have moved in pretty much perfect tandem over the past weeks. Note the latest “overshoot” by gold.

Source: LSEG Workspace

Upside force

The most recent decline lasted about two weeks, while the latest surge has been sharp and furious, unfolding over just a few days. GDX has been added to the chart, as it’s been especially volatile.

Source: LSEG Workspace

Gold $6k?

Not a “base case”, but here are a few bullets via Citi:

1. The physical gold market is too small to absorb large wealth shifts.

2. Gold supply currently equals only ~0.1% of total global household wealth.

A 0.1% increase in household allocations to gold would require doubling annual mine supply.

3. Raising average allocations from 3.5% to 5% would need 18 years of mine supply — about half of all jewellery and coin stocks ever produced.

4. Such a shift could only happen through much higher prices, potentially around $6,000/oz.

5. At current prices, private bar, coin, and jewellery holdings (~$20 trillion) already represent ~6% of global household financial wealth.