Gold: the bottom is in

Here is a synopsis of the gold market during the month of May. Gold made its low on May 1 when it momentarily dipped below $850/oz. Since then, gold broke out of a two-month long correction/consolidation when it surged above $900/oz on May 16. Gold topped out at around $935/oz on May 21, and this was the day to "sell in May and go away." During the past week, gold has been put to the test and sold off by about 60 bucks to today's low of $870/oz. I think today will be the last day we see gold trade below $880/oz; the bottom is in. Gold will most likely consolidate over the next month or two within the blue triangle formation shown below (880-920). This period will be the last chance to accumulate ounces and mining shares before gold permanently moves into four digit land.



There has been much talk about the need to raise interest rates to curb inflation, and such notion has propped up the dollar during the past week. But with the housing market still far from any signs of recovery, an interest rate hike is all talk and no trousers. Indeed the Fed is running out of room to cut interest rates, but this only means that the Fed will have to resort to outright quantitative easing. As for the recent dollar rally, I think it is ovah. Perhaps tomorrow's consumer sentiment data will kick things back into motion (i.e. dollar down gold up).