Gold Update

Gold has retraced a bit more than 50% of its recent decline.

Source: Bloomberg

Typically we should see a retest of the prior low, with gold price retreating to the 1350-1400 level.

This recent snap-back rally has been fast and furious, with the 8-day rate of change being one of the best in years.

 Source: Bloomberg

However, note that very often such rapid rises are followed by declines (black vertical lines identify a few such past instances). 

Inflation (both actual and expected) has been declining, serving as a headwind for gold and other commodities.

 Source: Bloomberg

It's my belief that the Fed's new inflation target (5yr5yr breakeven rate) is 3%, so this decline year-to-date certainly has not gone unnoticed. And we know the last thing "Helicopter Ben" wants is deflation.

But it's not as if the Fed isn't trying to boost inflation, with QE continuing at a steady clip.

Source: Bloomberg