DGP

With the government printing massive amounts of money, tensions between the US and China rising, Europe dealing with Brexit, the effects of the pandemic continuing to spread, and tensions with Iran rising, the fundamentals for gold still look fantastic.Massive unemployment, businesses closed or failed, and people leaving some of the big cities all point to a serious economic crisis and are bullish for gold.In March, the best thing the Fed did was to act right away with a stimulus package.We are dealing with a completely new set of markets in a new paradigm.

Gold prices are threatening the low end of a channel they've run in for two months.Spot gold ([[XAUUSD:CUR]], -0.5%) is close to $1,900/oz, a level it hasn't closed below since late

Uncertainty over the US elections remains elevated in the near term while the economy is running out of "stimulus".Closely contested elections have historically resulted in choppy markets in the final weeks of the year.Investors should hedge themselves by going long US dollar, gold and low-correlated sectors such as global mining stocks.

The persistent overboughtness in gold remains a serious downside risk. After shooting parabolic into early August, the high consolidation since has yet to rebalance away excessive greed and extreme overboughtness.Yet that still has to happen before this gold bull’s next major upleg can start marching higher. After such a vertical upleg euphorically climaxing, a correction remains highly likely.Gold’s technicals are still very stretched heading into its biggest seasonal pullback of the year. Any material selling could easily force technical breakdowns, unleashing cascading gold-futures and gold-ETF-share selling.

The big gold-ETF buying that catapulted gold higher into early August has gone missing in action since then. The major gold ETFs’ holdings have stalled out, explaining gold’s flagging momentum.With the global gold market increasingly dominated by GLD and IAU, gold can’t advance without American stock traders shifting big capital into gold through these conduits. Their buying has vanished.This gold bull’s precedent shows differential gold-ETF-share selling usually follows soon after big and fast holdings builds exhaust themselves.  Young momentum-chasing traders may still need to exit frenziedly-acquired gold-ETF positions.

Nothing prevents gold from being influenced by its main fundamental factor - the US real rate.The growth in money supply in the US in recent months will not necessarily lead to much higher inflation if the velocity of money remains at the same low level.The period of low volatility and flat curve slope is coming to an end.

Gold had become overbought in the past month, trading well above trend, making it ripe for a correction. Once gold started to fall, momentum built as profit-taking set in and bullion exchange-traded products saw their first redemptions since June.Since gold broke out on June 20, 2019 into its current trend, the gold price has gained 45% and the NYSE Gold Miners Index 79%. However, this outperformance has not led to overvalued stocks.With higher gold prices, we will see lower-quality gold mines being built. These are deposits that were not economic at lower prices because they would have high operating costs and/or high capital costs due to low grades and/or mining challenges.

As the brutal technology rout deepens, exchange-traded fund investors are placing bets on value.