XAU/Gold Ratio: The Deep Dive
Still waiting patiently for another possible nibble at some Miner positions. In the meantime, what is the XAU:Gold ratio and why is it important?
The Ratio clearly shows you that If you are going to invest or trade Gold/Silver Mining stocks you had best have some kind of time horizon to harvest profits. Why? The Ratio peaked in favor of the XAU all the way back in 1983. Yes the miners have underperformed Gold as a long term investment over that long period of time.
I am stating the obvious but this is because mining stocks are far more volatile than the metals. If you hold them too long your profits can disappear quickly. YCLs can be brutal to your portfolio and is shows you why my cycle work can be useful.
My first two charts don't go back to 1983 but these Weekly charts clearly show that the XAU has reversed this trend out of the December 2015 YCL. They also show that the Miners still have overhead resistance and thus more work to do.
My last chart provides a closer Daily look at the nearer term action since Dec 2015. It also shows why taking profits near Yearly Cycle peaks is worth considering. That is what we aim to do at Surf City Cycles....