The outlook for global economic growth appears dim, due to bad news from a number of fronts. In the US, factory activity in the Mid-Atlantic region fell, while US home sales unexpectedly fell in July and new claims for jobless benefits grew more than expected. In Europe, fears that the debt crisis could infect the region’s financial system resurfaced, also US federal and state regulators’ scrutiny of the US arms of Europe’s banks and some European banks’ higher interest rates for US dollar loans, led to worries about spillover of Europe’s debt crisis into the US banking system. The decreasing global consumer demand and markets contagion led to other markets’ falls.
Investors are moving away from economy-dependent assets like T-Bills, currencies and from firm-dependent securities like stocks and bonds to economic performance-independent commodities (unlike oil) as safe-haven instrument while markets, particularly equities, continue to tumble all around us. Specifically, there is a rush for gold.
The graph shows the sharp price rise of gold in August. However, the most telling sign is the volumes traded in recent times, compared to over the previous months. Noteworthy is the high RSI (Relative Strength Index), which is generally indicative of an overbought situation, although here supported by price increases and prices touching the upper Bollinger. In other words, technically speaking (if you subscribe to such views), “sell” is still not signaled, since the indicators are not divergent.