Gold Looks Poised for Oversold Bounce

investing.com:

For the first time in many weeks, gold is starting to look relatively attractive again. If you loved gold at $2K+, it is now on sale near $1.8K. But will it find buyers is the key question? The sharp $130 (6.7%) drop in the space of a couple of weeks (from its 21^st September high) means gold prices are technically oversold and potentially due to a short-covering rally from these long-term support levels.

With the sharp drop in bond yields on Wednesday and a bigger sell-off in oil prices this week (which is disinflationary), there are now solid reasons for some potential bargain hunting. So far, however, the bulls are nowhere to be seen.

Well, to me, there are no questions about gold’s long-term bullish outlook. Given how much inflation has further devalued fiat currencies since the start of the year, when gold last staged a big rally, the metal should be shining more brightly anyway, if it truly is an effective inflation hedge.

The fact that it hasn’t, is almost entirely because of the big falls in government bond prices, lifting their yields to multi-year highs and thereby increasing the opportunity cost of holding the non-interest-bearing commodity. But much of the Fed’s hawkish repricing of interest rates is now done, meaning that the downside for bonds and, by extension, gold should be limited moving forward. That’s not to say gold will necessarily find a bottom imminently. But equally, we are now not too far either, I believe. So, be on the lookout for fresh bullish signals to emerge from here on.

On Wednesday we saw yields take a nosedive and that caused the dollar to weaken. Though that move has stalled somewhat so far today, there is a good chance we may see renewed weakness start to creep into the dollar moving