As Gold and gold mining stocks approach strong resistance, we wonder if the outcome will be a sharp selloff or a period of bullish consolidation. While there are a handful of things we can examine (sentiment, momentum, relative strength, etc), today we will focus on Gold and its relative strength against two key markets. How Gold fares against Bonds and foreign currencies in the weeks ahead could be a hint of its trend heading into spring. 

Below we plot Gold against Bonds and Gold against Foreign Currencies (FC). Gold against the 30-year bond is shown with the 200 and 400-day moving averages while Gold against FC and the 400-day moving average is plotted at the bottom.

As we can see, the Gold/Bonds ratio is attempting to breakout from two-year resistance. The ratio has consolidated for the past nine months and now the moving averages are aligned in bullish fashion. Meanwhile, Gold/FC is trading above support but like Gold itself faces resistance from early autumn.

Gold vs. Bonds, Gold vs. Foreign Currencies

 

Gold has been lagging the miners recently and that is a good thing. The miners should lead. However, as Gold nears resistance (potentially at $1250/oz) it is important for it to show relative strength against the other asset classes and in particular Bonds and FC. A breakout in the Gold/Bonds ratio would signal that Gold would be less affected by weakness in Bonds (and rising yields). Meanwhile, continued strength for Gold/FC would signal that Gold would be less impacted by a rising US Dollar.

When focusing on the very short-term we see that Gold has been turned back at $1220/oz while the miners have continued to grind higher. They opened lower Wednesday but managed to close at the highs of the day. Their rebound is getting long in the tooth but there is a chance they could grind higher towards the red lines.

GDX, GDXJ, Gold Daily Bar Charts

As Gold and gold mining stocks approach resistance we will keep an eye on their performance relative to the movements in other asset classes. A pullback from resistance is very likely but the question is if the pullback evolves into a deeper correction or a bullish consolidation. In the meantime we have focused on buying quality and value in the junior space while maintaining some cash. The good buying opportunity we noted a month ago has passed but another one will come soon one way or another. 

Jordan Roy-Byrne, CMT, MFTA

Jordan@TheDailyGold.com

For professional guidance in riding the bull market in Gold, consider learning more about our premium service including our favorite junior miners for 2017.

Scientists Made Graphene Carry an Electrical Current With Zero Resistance

IN BRIEF

• Superconductive materials are used to make technology like MRI machines, particle accelerators, and levitating trains.
• Graphene is known as being one of the strongest materials on Earth, and its newly found superconductive properties could lead to a host of transformations in these sectors.

….continue reading HERE

Summary: Global equities are nearly 25% higher than in February 2016. A tailwind for this rally has been the bearish positioning of investors, with fund managers persistently shunning equities in exchange for holding cash.

That’s no longer the case.  Fund managers became bullish again in December, and remain so now. Optimism towards the economy has surged to a 2-year high. Cash remains in favor (a positive) but global equity allocations are now back above neutral for the first time in a year. Another push higher and excessive bullish sentiment will become a headwind. The main exception to this is emerging markets, which are now out of favor and a contrarian long.

Findings in the bond market are of greatest interest. Fund managers’ allocations to global bonds are now at prior capitulation lows. Moreover, inflation and growth expectations have jumped to the highest level since early 2011, after which US 10-year yields fell in half over the next several months.

The dollar is now considered the most overvalued in the past 10 years. Under similar conditions, the dollar has fallen in value in the month(s) ahead.

.…read and view analysis & status of 10 more sectors HERE

…related:

Major Markets at Turning Points

1. Where To Find Decent Income Returns

Michael Campbell & Aaron Dunn of Keystone Financial

Michael interviews income stock guru Aaron Dunn to discuss how to overcome the double whammy of low interest rates and too many investors chasing the same product.

….read & view more HERE

2. Martin Armstrong: Stock Market Bubble Still to Come

 by Martin Armstrong

Martin’s thoughts on a wide range of topics, including his current forecasts on stocks, bonds, why he doesn’t think the market is in a bubble yet & the attempt by governments to ban cash around the globe 

….continue HERE

…related: They Call Him “The Forecaster” For Good Reason

3. Crude Oil – Maxed Out & On The Brink of a Significant Move

   JR Crooks – Uncommon Wisdom

The idea is that crude oil’s climb has maxed out.

Forever? Nah.

For the month? Likely.

For the year? Perhaps.

….continue reading HERE