The main case for gold was the weakening of the dollar that took place from November to early February, states Steve Reitmeister of Reitmeister Total Return.

This was grounded on the premise that inflation was coming under wraps more quickly than anticipated allowing the Fed to be less hawkish (more dovish) in the future.

Dovish Fed = Weaker Dollar = Gold More Valuable in Dollar Terms

Hawkish Fed = Stronger Dollar = Gold Less Valuable in Dollar Terms

Given the recent slate of too-hot inflation reports and Fed statements like yesterday's FOMC minutes, then the Hawkish Fed equation is more likely which makes gold ownership less appealing.

  • Sell all shares of ProShares Ultra Gold ETF (UGL)

Reity, are you saying that gold will not appreciate in the near future?

No. I am saying the primary reason for us to own gold is no longer true. Thus, the odds of higher gold prices have lessened, making it a less attractive trade. Note that I did contemplate just keeping a lower allocation to gold. But right now, with investors better appreciating the long-term hawkish intent of the Fed...then hard to make a good case for a weaker dollar and higher gold.

So, I would just rather walk away and find a better place for our money down the road. The likely next move for RTR would be if we have a clear break below the 200-day moving average at 3,941, then ARKK would be the next position out the door. This would further align our portfolio to profit from the likely resumption of bear market conditions.

That is not a given at this stage as we may just be exploring the bottom end of the current range of 4,000 to 4,200 as the dazed and confused phase extends. This would have us waiting until later for signals about inflation, Fed intent, and the health of the economy that breaks us out of the range...potentially in either direction.

As always, we are prepared for any eventuality with the bearish outcome still the most likely.

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