All Quiet on the Gold Front?

A few of my regular readers asking why I've been quiet on gold so far given that it is probably the asset I talk about more than any other. 

The simple reason is Payrolls is tomorrow, and putting a trade on now is like, to quote Taleb, "picking up pennies in front of a steamroller". 

That said, given the interest from readers I've cobbled together a few thoughts - tomorrow morning I'll throw together a full Payrolls primer, but for now this is what I think of gold: 

Short Term: 

Gold has been pretty directionless as we await some signal which may provide a more clear timeline for tapering. 

Sure, we've seen something of a move higher off the absolute lows of the last couple of weeks, but generally we've been trading in a pretty tight range recently between 1760 and 1820. This trend actually extends back much further too as quiet summer markets have been not providing much interest for gold. Sure, there was that brief plunge below 1700, but I'd be pretty surprised to see anything like that again in the near future. 

Long Term: 

Anyone who knows me knows that I am very structurally bullish on gold. One need look back only at the last 40 years of history to see that the story of gold has been one of higher prices as real rates have come lower. With real interest rates in deeply negative territory (despite something of a rally in the last month) this support for gold is likely to continue. 

Likewise, despite concerns that tapering may cause real yields to rise etc, this effect is likely to be muted in my opinion as significant slack still remains in the US labour market. 

In Europe, the possibility of hiking rates is still years away, so it is also highly unlikely that this will stop being stimulative. As I see things, there is little room for real yields to get carried away, and with governments racking up ever larger piles of debt, the case for gold looks pretty strong. There may be some headwinds from the USD, but as I see it I'd rather have gold as a decent 10% slab of the portfolio to hedge against further inflation risk. 

All of this so far is supportive for gold without me even mentioning the geopolitical uncertainty which will only be a further boon to gold. 

But when I look at the charts, again I struggle to find much immediate term conviction. If you put me on the spot and forced me into a trade now, I'd be going long. But I'd favour a post payrolls strategy more of looking to buy on any dips. 

My strategy from here would be to split the trade into 5 segments at $8 a segment as this covers many of the key levels. First buy would be at $1800 (or just above), next at $1792, then $1784, then $1776, then $1768. With a TP of the top of the range around USD1830/oz (although I'm more structurally long so would be looking to hold beyond there). 

SL would be phased out too - first below USD1760 then below USD1748 for the remainder. If we drop significantly below USD1750, the next target will be USD1670, so worth getting out of the trade there. 

Conclusions: Gold is rangebound for now and I don't have much short-term conviction either way. If in doubt, keep 'em out. So I won't be putting on any gold trades until post payrolls.