This has been the best week for gold bulls since 2011. Although we watch and analyze the market daily, the weekend is a good time to come to grips with why, after the debacle of mid-April, gold has tipped both fundamentally and technically to the bull side.

Today saw a modest sell-off attributable to profit-taking, something of little matter in the long run, although, given the new state of volatility, unnerving nonetheless. downward move was moderated somewhat by a weaker dollar today. The profit-taking was a bit more pronounced because it is a Friday and already people are beginning to settle their accounts before taking to the hills for a mini-vacation a la the summer holiday period. As the saying goes, "You're never wrong when you take a profit."

When the price of anything - gold included, of course - goes low enough, buyers will emerge. And emerge they did this week, across the globe. Felicitously, India is in the midst of its wedding and spring festivals seasons, normally a high point in the Indian gold-buying year. The sentiment for buying physical gold in India is the same as any other market, The price seems reasonable, affordable, and the price seems to be rising once more, so one had better jump on the train. In China and across southeast Asia, hoarding for personal savings purposes, (store of value), is involved with the same calculations. In the United States, buyers of premium mint gold coins have come out of their winter hiding like sunbathers on the first warm summer day. The bottom line is this: there has been pent up demand and that demand is now being satisfied because of a perceived good value.

Moreover, there is very healthy buying by a large handful of central banks, especially those that hold billions of U.S. dollars in their reserves. It is a counterintuitive strategy systemically for such countries - Russia, Turkey, China: they might be better off spending their reserves to stimulate their economies, all of which are struggling. Be that as it may, their strategy is aligning with the revival of the gold market. 

As we have said before, there is a passage that gold bulls are making now between gold as a safe-haven and gold as an inflation hedge. In the last 6 or 7 sessions, gold has reverted to its safe-haven status. This is partly because equities, while not tarnished exactly, have lost some of their late winter-early spring luster. While wishin' and hopin' are all well and good, there is a lot of uncertainty in almost every major world economy or economic bloc. That weighs on equities. The biggest fear right now is summed up in this question: "What if the ultra-accommodative monetary policies enacted by all the major players don't work?" 

The answer is that eventually they will work. And that plays right into the notion of gold as a long-term investment rather than a short-term "day trade" type of instrument. Better to understand the possibility of a continuing period of slow growth, first with low inflation followed by more slow growth muddied by inflation, a condition reminiscent of the stagflation of the 1970s. 

Throughout those shifting scenarios, gold will remain a valuable asset to have in a portfolio. Dips are inevitable and we must play them and take advantage of an uptick in prices.

As always, wishing you good trading,