Silver 3000 Up Gold 600 Point Up – Jo Dar Gaya Samjho Mar Gaya – Neal Bhai
Gold volatility has started to pullback to a more significant degree, and alongside a sideways move in gold prices, there has been a deterioration in short-term correlations.
Silver MCX 65000 To 67815
GOLD MCX 51300 TO 51876
Gold volatility (as measured by the Cboe’s gold volatility ETF, GVZ, which tracks the 1-month implied volatility of gold as derived from the GLD option chain) is trading at 22.90. The 5-day correlation between GVZ and gold prices is 0.35 while the 20-day correlation is 0.22; one week ago, on August 19, the 5-day correlation was 0.31 and the 20-day correlation was 0.40.
Our longstanding axiom holds: “given the current environment, falling gold volatility is not necessarily a negative development for gold prices, whereas rising gold volatility has almost always proved bullish; in the same vein, gold volatility simply trending sideways is more positive than negative for gold prices.”
“Gold prices have completed the inverse head and shoulders pattern first identified in mid-2019. Depending upon the placement of the neckline, the final upside target was 1820.99. The long-term gold thesis is now evolving, but with the bottoming effort completed, we can now turn our attention to all-time highs at 1921.07 – and well-beyond over the coming months.” Gold prices failing through the former yearly high at 1921.07 would be a major warning sign for gold bulls.
A loss of the August low at 1862.90 would be a very important development insofar as redefining the recent consolidation as a topping effort rather than a bullish continuation effort.