While the chart of gold in US dollars is a bit of a mess, the chart of gold in Canadian dollars looks much different:
Gold (Canadian Dollars – Daily)
Gold in Canadian dollar terms bottomed in the summer of 2013 and the uptrend is still very much intact. The decline of the last month is the most extreme sell-off since April 2013 and by multiple measures gold is also the most oversold it has been in 3 1/2 years. The support/resistance between C$1530 and C$1560 is key; if it holds a bounce-back rally up to ~C$1675 will be in the cards, whereas, a breakdown below C$1530 would mean that a deeper correction down to C$1400-C$1450 is likely.
For Canadian based gold miners the Canadian dollar price of gold is important because the vast majority of capex and operating expenses are paid in Canadian currency. Smaller gold producers in particular are less likely to hedge currency risk, thus making the Canadian dollar price of gold much more relevant to their business than the US dollar gold price which virtually all traders and investors are so intently focused.
As an important ‘tell’ as to where we are at in a gold bottoming process I will be watching to see if the C$ gold price breaks above C$1560 or down below C$1530 over the coming days.
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