There is much excitement in the perma bull camp for gold these days as gold has rallied 7% over the last couple of weeks.  A closer examination, however, shows that the rally is nothing to get too excited about.  In the chart of GLD below, there are two series plotted under price.  The first is 21 day intra day intensity which is a price/volume based momentum oscillator.  Readings above zero are positive (generally bullish) for GLD and readings below zero are negative (generally bearish).  Notice how the 21 day intra day intensity dipped well below the zero line in late March and has just now crossed above zero while the price of GLD is attacking its January 11 high.  In fact, Intraday Intensity is still in a downtrend that was started at the December high in GLD.   This shows a lack of conviction on the part of buyers in GLD.  Under Intraday Intensity is a plot of normalized volume.  In this case, volume is normalized over a 50 day period which means that each day's volume is divided by its 50 day moving average.  That puts the daily volume on a scale where 100 equals 100% of the 50 day moving average of volume.  This means that readings over 100 are above average and readings below 100 are below average which makes volume readings easier to interpret.  Notice how volume has  been unimpressive during this two week rally phase.  In fact, as price reached the January 11 high, volume came in around average.  Not the type of conviction one would like to see in a market that is trying to break through resistance. 



To gain a deeper perspective, let's take a look at GLD in relation to the two major world currencies.  The chart below contains a price plot of GLD (the red line) along with a GLD US Dollar spread (the black line) and a GLD:Euro spread (the blue line).  Notice how GLD has pushed up to its January 11 high, it has broken out to new highs against the Euro (the blue line).  Also notice how GLD is lagging vs. the dollar (the black line).  This says that investors have been dumping the Euro to hold gold since the Greek debt crisis deepened in early February.  Notice how the price of gold is stable in dollar terms, remaining rangebound since January of 2010.  As the EU and IMF fire up the printing press to bail out Greece's incompetent leadership, fears will ease further and the markets will await the next sovereign debt crisis, which will cause a flow away from the safe haven of gold - for now.   



In the future, gold will rocket out to new highs as multiple sovereign debt crises challenge the very fiat currency system on which the world economy is based.  It is just not time yet.  There is still farther to go in the equity rally as the printing presses continue to run 24/7 around the globe and free capital is pumped into the markets.  It is just a matter of time, however, before the greed and incompetence of global leadership will bring gold to the forefront as the tangible investment of choice.