Gold futures prices dropped to $1,171 this morning as the dollar surged into the European closed and the OPEC deal sent oil prices spiking. The precious metal is now unchanged since October 2014, but as UBS notes is dramatically oversold at current levels.
Gold is unchanged since Oct 2014...
UBS notes that last week’s break below $1200 does not change our view on gold. The recent undershooting below $1240 and $1200 we continue to see as an extension of the summer correction (based on the overshooting in rates and therefore rising real rates), instead of starting a new major breakdown. With the break of the 2012 downtrend in US inflation expectations but expecting a pullback in yields into Q1, it should be just a question of time to see a new bounce/rally starting in gold/gold mines.
A re-break above $1200 would suggest increasing evidence that a more important tactical bottom is in place.