We and many others have made a valiant effort over the years to explain what actually moves the gold market (as examples see our article “Misconceptions About Gold”, or Robert Blumen’s excellent essay “Misunderstanding Gold Demand”).Sometimes it is a bit frustrating when we realize it has probably all been for naught.
Photo credit: Ajay Verma / Reuters
This was brought home to us again in a recent missive posted at Kitco, which discusses an RBC research note on gold. In a way, it is actually quite funny. The post at Kitco is titled “Gold’s ‘One-legged’ Rally Is Cause of Concern”.
We can assure you it is not of “concern” to us. But we did wonder why the rally was supposedly “one-legged”, so we decided to read on.
Here is what RBC has decided was worth sharing in its new research report:
Despite gold’s impressive run up so far this year, analysts at RBC Capital Markets are concerned by the “one-legged” nature of its rally. In a research report Friday, commodity strategists for the bank noted that gold’s 2016 upswing has been mainly driven by investors, while other sources of demand haven’t followed through.
“In fact, investment demand seems to be the only leg driving this one-legged rally. For us to turn positive, we would need to see this strength replicated elsewhere,” they said. “Investor sentiment has turned amid a flight to safety, but that seems to be the only sentiment that has in fact shifted.”
(emphasis added)
Color us completely flabbergasted. What “others sources of demand” apart from investment demand are supposedly needed to produce a rally in gold and make it two-legged or maybe even three-legged?
June gold, daily. You poor one-legged thing! – click to enlarge.
We could of course see where this was probably going, and RBC’s analyst minions didn’t disappoint:
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