What will be the next bullish catalyst for gold?

Gold bulls have to be concerned after this week’s poor performance by the yellow metal in the face of enormous gains for equities. Gold continues to make lower highs as it trends lower within a well defined downtrending channel as seen below:


While the daily chart certainly doesn’t look pretty, the long term chart going back to the beginning of the 12-year bull run offers investors a clearer perspective regarding the recent  16-month messy oscillation:

The main concern for precious metals bulls, potentially even more worrying than the recent poor price performance, is the continued bullish stance of Wall Street sell-side analysts:

Most sell-side analysts have maintained price targets above $1800 for the past 12-18 months even as gold has remained under pressure. As can be seen on the slide below, most of the bullish thesis for precious metals is well known and can be categorized as conventional wisdom:

From my estimation,an unknown (or at least lesser acknowledged) bullish catalyst will be required for gold to breakout from its 16-month trading range between $1525 and $1800. The much repeated “central bank money printing” thesis has grown tired; gold ended today’s session $40+ lower than where it was trading on the day the Federal Reserve embarked on QE-Infinity. Moreover, virtually every other major global central bank is currently engaged in some form of quantitative easing or extraordinary monetary policy accommodations.

What will this unforeseen bullish catalyst be? Here are a few possibilities:

  • Large net creditors of the United States (China, Japan, Saudi Arabia, etc.) rapidly accelerate their gold purchases in an effort to further diversify away from the dollar
  • Mining output surprisingly trends lower at a rate much faster than expected as mining costs continue to soar, thereby, reducing the amount of marginal gold supply as the marginal cost of extracting an ounce of gold continues to increase
An excellent chart on the all-in cost of gold mining
  • After many months of relative dormancy the eurozone crisis rears its ugly head again and one or more countries exit the common currency

Any other ideas? (please let me know in the comments section)