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Showing posts with label technicals. Show all posts
Showing posts with label technicals. Show all posts

Tuesday, May 23, 2017

Gold signals potential breakout as price once again achieves golden cross technical

In today's world, if all markets were freely traded then fundamentals and technicals would actually mean something to traders and investors.  However, with most major banks having been found guilty over the past five years of rigging almost every market, and the Federal Reserve assuring that equity markets will never go down any real extent due to trillions in cheap money, the once long-standing indicators of bullish and bearish sentiments are only relevant to the most ardent of investors.

But with that being said there are still thousands of analysts and traders who rely heavily upon technical analysis to make investing decisions and forecast market direction for a given asset class.  And on May 22 one of these technicals moved positive after weeks of price declines to have once again achieved the signal of a golden cross.

And the asset which has signaled this bullish sentiment and technical move is gold.

Gold is up nearly 10 percent this year and might be primed for more gains if a signal tracked by technical analysts triggered Monday is any guide. 
A small gain was enough to push the metal's 50-day moving average price above the average price of the last 200 days, forming what's known as a "golden cross" in technical analysis circles. This is seen as a positive signal that demonstrates an asset is outperforming so well in the short-term that it may reverse a longer term downtrend. - CNBC

Wednesday, June 1, 2016

Gold prices cheap in relation to stocks (Dow) and oil

In the financial world, technicals can sometimes carry far more weight than fundamentals do.  Ie... stocks right now on the S&P and Dow indices remain close to their all-time highs despite the fact that Wall Street just had one of its worst earnings seasons since the Great Recession.  Thus investors have been trading primarily on technical analysis and Fed intervention, and have thrown out nearly all fundamental data as irrelevant.

With this in mind we will look at two interesting technical charts that compare stocks on the dow, as well as oil prices in relation to gold.

Gold versus the Dow:
This 50-year chart of the blue-chip Dow Jones Industrial index from Macrotrends suggests otherwise. The graph tracks how many ounces of gold it would take to buy the Dow over any given month going back to 1966. 
In January of 1980 when gold in inflation-adjusted terms hit an all-time high of roughly $2,400 an ounce the ratio was 1.3 ounces and during the Great Depression it took 1.9 ounces to cover the Dow. 
That compares to highs around 40 between mid-1999 and mid-2001 when gold reached lows of $250 an ounce. 
When the nominal price of gold hit a record high above $1,900 in August 2011 the ratio was 6.4, but has now more than doubled to just under 15. 
That means despite the exceptional start to 2016 gold is still cheaper than it was for the 24 years between May 1972 and September 1996 and on a relative basis it's the cheapest since December 2007. - Mining.com
50 years of gold price vs Dow shows metal still a bargain

Gold versus oil:
The Golden Constant: The English and American Experience 1560-2007. In that work, Jastram finds that gold maintains its purchasing power over long periods of time, with the prices of other commodities adapting to the price of gold. 
Taking the broad lead from Jastram, my colleague, David Ranson, produced a study in April 2015 in which he used the price of gold as a long-term benchmark for the price of oil. The idea being that, if the price of oil changes dramatically, the oil-gold price ratio will change and move away from its long-term value. Forces will then be set in motion to move supply and demand so that the price of oil changes and the long-term oil-gold price ratio is reestablished. This is nothing more than a reversion to the mean. 
We begin our analysis of the current situation by calculating the oil-gold price ratios for each month. For example, as of May 24th, oil was trading at $49.24/bbl and gold was at $1231.10/oz. So, the oil-gold price ratio was 0.040. In June 2014, oil was at $107.26/bbl and gold was at $1314.82/oz, yielding an oil-gold price ratio of 0.082. The ratios for two separate periods are represented in the accompanying histogram - one starting in 1946 and another in 1973 (the post-Bretton Woods period). - Zerohedge
Two interesting technical ratios to watch in the market which can be signals as to which direction gold prices will eventually go.