Still looking at gold but not inclined to short it yet. There is scope for it to rally further if risk assets continue to rally, and while it looks to have bounced off the top of a short-term range, this is happening on low volume and on a silly panic about Japan’s upper-house election.

Incidentally, Bloomberg had the following quotation today:

“Given the increase in broader risk appetite, gold may be vulnerable to further long liquidation,” said James Moore, an analyst at in London.

Actually, gold has a large and growing correlation with “risk appetite”. The pinky-purple line in the chart below is the 1-year weekly correlation between gold and equities. Gold is a risk trade.

Why is gold a risk trade? I suspect because buying is driven by the “quantitative easing means high inflation” brigade. As growth looks stronger, equities rally and people fret more about inflation, and buy gold in the daft belief that it is an inflation hedge. 
Short US Treasuries