Bob updates Currencies, Credit markets, Gresham’s Law Stocks etc – Editor Money Talks
Definitely bullish on gold
It has been fascinating that despite all, including the desperate, interventions the real price of gold has had consistent behaviour. Down in a boom or bubble and up in the bust. This has worked over hundreds of years of financial history.
Within this is the behaviour of the gold/silver ratio, which goes down with the booms and up with the contractions. It’s been doing it for centuries.
As we have been reviewing, on the “old” paradigm silver outperforms gold as both rally together. At important highs such as in 2011 and in 2012 momentum on the silver/gold ratio provided the “danger” signal.
In the “new” paradigm it has been likely that gold would outperform silver.
On the nearer-term chart this would show up when the gold/silver ratio increases above the last high of 68 set earlier this year.
That high became overbought and with this week’s concerns about Iraq, the ratio has declined to 65. At 34 on the Daily RSI now, at 30 it would be oversold enough to end the decline.
Our May 29th Pivot noted that gold was poised for a rally and this seems to be working out. The low was 1240 set at the first of the month.
We are definitely bullish on gold’s real price and our Index has turned up. At some point the rise will begin the enhance profitability of the gold industry.
Gold and silver stocks will be vulnerable to the pending liquidity crisis.
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