Thursday, June 23, 2011
Gold - Like A Rock
The recent strength in Gold has been incredible. Today's drop is nothing when looking even at a 6 month chart. Gold has held up phenomenally as non-monetary commodities drop down near their 50 week moving averages as anticipated.
This is the cycle where Gold separates from the herd. Gold is the anchor of the international monetary system, not the U.S. Dollar. The clash of the titans is alive and well. Those looking for a replay of 2008 in Gold (which would be fine, since Gold was back at $1000/oz before the March, 2009 panic lows in equities) don't get it. The private sector still carries enormous leverage, but now a good portion of it has been transferred to the sovereign side. This means no paper currency can be trusted to hold its value. Even though I think the US Dollar could rise again if we have another panic, I think Gold will rise right along with the Dollar if this happens.
You can bet that Gold will go from being the sworn enemy of every central banker to the "great yellow hope" of the currency boxing world. Central bankers will grow to love Gold once they lose what little credibility they have left during the next cyclical bear market in equities.
Here's a 6 month daily candlestick chart of the GLD ETF (to allow me to use candlestick charting, as I can't do that with the futures contract prices on stockcharts) thru today's close:
I had previously wondered about a triangle for this correction, and perhaps we are headed that direction. In any case, Gold's relative out performance to me is a major signal not to be ignored. Gold relative to stocks and commodities when looked at from the perspective of a ratio chart (i.e. relative rather than nominal gains) has been on a tear. A breakout from what is shaping up to be a sloppy ascending triangle could lead to a rapid, extended fifth wave type bull thrust to the upside in Gold.
My subscribers and I are honing in on the Gold stock sector, as I think Gold stocks will outperform Gold on the move out of the gate. Specific trading recommendations and more in-depth analysis reserved for subscribers. However, my main recommendation is the same that it's been for years and is no secret: hold onto your physical Gold until the Dow to Gold ratio hits 2 and we may well go below 1 this cycle. Physical Gold is my only long-term "buy and hold" investment and everything else is for renting or shorting in my opinion.