Wednesday, December 30, 2009
Gold to Commodities - Back the Other Way
The ratio of the nominal Gold price to the nominal price of a basket of commodities (i.e. the "real" price of Gold as Bob Hoye calls it) is now oversold enough to cause a swing back the other way for several weeks. This should correspond with a nice swing higher in the Gold stock sector.
Here's a 1 year chart of the Gold price ($GOLD) divided by the $CCI commodities index (i.e. a $GOLD:$CCI ratio chart):
Again, I don't use this ratio as a trading signal, rather as a fundamental underpinning. I think in this case the fundamentals and Gold stock price indices will rise at the same time, as both are oversold and the $GOLD:$CCI ratio is already at multi-decade highs, so a small bump in this ratio should be all that's needed to vault the Gold sector higher as 2010 begins. I, for one, continue to believe it is going to be a MAJOR move higher in Gold stocks.
Happy New Year!