Printer Friendly

eMail Article

November 13, 2006

Revisiting the Dow-Gold Ratio
by Gary Tanashian

In light of today's early going, where gold is being blown up in London (pre-NY open), I thought I would take the pulse of the current Dow-Gold Ratio. Gold has recently done some very bullish things vs. the Dow as evidenced by the short-term (daily) chart. The trend has changed and bearish divergences have developed for stocks vs. gold. All's well apparently in Goldbugville. Not so fast...

The weekly chart shows a different story. Stocks still have not met their secular downtrend line vs. the yellow metal and in fact have not lost their uptrend. No sign of bearish divergence either. The US Dollar is at a critical juncture and the bond market is trying its best to re-inflate Goldilocks (yield curve relentlessly declining). Combine this with a notable upturn in sentiment in the gold sector (newsletter writers are bursting with bullishness including some who were notably bearish until recently) and we have the makings of a correction at the least. Our targets of 605 +/- for gold and 309 to 319 for HUI are back in play. While stocks may simply decline less than gold, it would not be surprising to see additional upside here for all things paper.

At this point, I will call this an opportunity for a) buyers who missed the initial leg up to take gold sector positions and b) for the gold complex to shake off the fleas so to speak and eventually head higher with the strongest of holders. Meanwhile, prepare for some volatility. The word volatility is always easier to write than to sit through. Keep that in mind.

Please note you can visit the blog for ongoing and up to date analysis as the Biiwii Letter has been scaled back due to time constraints.

Gary Tanashian
http://www.biiwii.com/

Disclaimer: biiwii.com does not recommend that any trading or investment positions be taken based on views expressed on this site. If you speculate or invest it is suggested that you consult a financial advisor qualified in your area of interest.

Copyright © 2005-2008 Gary Tanashian

Image rendition and html coding Copyright © 2000-2008 SafeHaven.com

« BullionVault.com -- Buy gold online - quickly, safely and at low prices »
« Honest Money: A History of U.S. Gold & Silver Currency -- by Douglas V. Gnazzo »

« Opinions expressed at SafeHaven are those of the individual authors and do not necessarily represent the opinion of SafeHaven or its management. Articles are available via RSS/XML. Please visit RSSHelp for instructions. »