Gold broke below its recent flag formation, warning of a test of support at $1200/ounce.
Selling is driven by expectations of a Fed interest rate hike in June …..and recent Chinese stimulus which postponed Yuan devaluation against the Dollar. But expectations of a rate hike are causing a sell-off of the Chinese Yuan, with the USDCNY strengthening over the last few weeks.
…Which in turn will cause the Chinese to sell foreign reserves to support the Dollar peg (…..else devalue which would panic investors and cause a downward spiral). Sale of Dollar reserves by China would drive the Dollar lower.
…and Gold higher. I remain bullish as long as support at $1200/ounce holds.
Disclosure: Our Australian managed portfolios are invested in gold stocks.