It's obvious that we have a technical breakout in the Amex Gold Bugs Index from the triangle pattern. What is less clear is why the index is breaking out.
The Iran situation is one possible reason, but Oil has been falling during the Iran crisis so why would Gold rise?
The other plausible reason is physical buying since September is a period of seasonal strength. However I have not read anything to inidcate that strong physical buying is behind the current surge.
Of course there are otrher reasons that may account for the rise in Gold, for instance the fact that the Fed, in all likelihood, has not only paused but ended rate hikes.
Throwing some further fuel to the speculation is the fact that the inflation reports in the last couple of weeks were not as grim as originally feared (though still elevated), lending a slither of credibility to the Fed's suggestion that inflation may lessen with the slowing of the economy. But if the economy is really slowing, then why is Silver, more an industrial metal, outperforming Gold?
What then is causing this breakout in the miners and will Gold follow? I think we'll soon get a better feel for what the current action is about. In the meantime, with the miners looking a little overbought it's probably better to take some profits and watch a little bit and see how the action develops without being too leveraged. I would likely look to commit my remaining capital at around 355 HUI.
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