One Eye on the Gold Bugs, the Other on Bond Bulls

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The “easy” trade to short gold has been anything but, as the bullion hangs tough even after a steep run higher and recent volatility. Recall that gold has been part of the “fear trade” of late, along with safety seekers piling into Treasuries. As we have seen over the past few days, equities do not need gold and Treasuries to crash in order to rally, but sooner or later they are going to need the persistent underlying bid–especially under Treasuries–to at least soften. As you can see below, both gold and bonds are consolidating after their recent legs higher. To my eye, gold looks more vulnerable to a swift rollover than do Treasuries, but either way I will be watching to see what the opinion is of the only person who really matters: Mr. Market.

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