Our global gold advance/decline line has broken below key support and is at a 2-year low.
This indicator has a good track record of timing major shifts in gold, and the decline is particularly worrisome since it reflects universal negative sentiment towards the yellow metal.
ETF outflows last month were also the largest on record, and the option-based momentum suggests further outflows.
Any upside surprises in economic data could also stifle demand for gold. Tame inflation expectations, rising real rates and a flattening yield curve diminish golds safe haven appeal. Consistent with this, our gold cyclical indicator is low and falling.
We cannot completely rule out another US (or worldwide) deflation scare, which would return gold to investor radar screens and lead to new highs. But we assign this outcome a low probability.
Bottom Line: Tail risks are receding and the corollary from new highs in the Dow index is a declining equity risk premium, which is negative for gold.