One Huge Chart That Has Everything You Need To Know About Gold

Morgan Stanley has made it no secret that they’re bearish on stocks and the economy.  However, in this backdrop, they’ve also made it very clear that they favour gold.

But what is it about gold?  Where does it come from? Where does it go? You certainly can’t eat it.

Below is a chart from Morgan Stanley’s Global Metals Playbook.  And it answers all questions.


[credit provider=”Morgan Stanley”]

Even after it recently fell below its critical 200-day moving average, Morgan’s not concerned.  Here’s their take;

Gold prices have fallen sharply since reaching a new all-time intraday high of US$1,925/oz on September 6, 2011, and a closing high of US$1,889.7/oz on 22 August. The retreat to US$1,541/oz on December 29 represented a 18.5% decline from the record peak on a closing basis. In the process, the spot price trend broke the 200-day moving average in mid-December, raising fears that the 10-year bull market in gold was coming to an end.

We have a different view. Such corrective price movements, while less aggressive than that in 2H 2011, have been evident throughout the 2001-2011 bull market, especially since the acceleration in the uptrend from 2009. Moreover, the timing of the sell-off, especially to the sell-off low in late December, suggests strong selling pressure linked to year-end book squaring, portfolio adjustments and commodity index reweighting. Furthermore, the sell-off also coincided with an especially sharp rally in the TWI of the USD, a strong headwind for gold given its USD pricing and quasi-currency function.

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