- Posted by JC Parets
- on November 21st, 2012
My email inbox has been bombarded with some awesome gold charts over the past 24 hours. And I feel that it would be irresponsible of me if I didn’t share at least some of them with you guys.
The first one comes from my friend Ari Wald over at The PrinceRidge Group:
“Rising inflation expectations and a weakening U.S. dollar are two factors that have bullish implications for the price of gold when working together. Gold’s upward breakout in August can be attributed to rising U.S. breakeven inflation rates (i.e. implied inflation) and a 6% drop in the U.S. Dollar Index (DXY). These trends have reversed in recent weeks and consequently coincided with a pullback in the spot price of gold. While a stronger U.S. dollar could pressure gold prices in the near-term, an improving supply/demand relationship for the yellow metal bodes favorably for a continuation of its secular uptrend.”
The next two charts come from technician Peter L. Brandt, a true expert in classic pattern recognition. If you haven’t seen his Post about the History of Gold Charts, you better go check it out right away. But in the meantime, here is what Gold looks like today:
Comments from Chartist Peter Brandt:
- Gold always rings a bell before making a major move.
- Absent a clearly defined chart pattern it is doubtful that Gold will develop a sustained trend.
- Clearly defined chart construction has now shown itself. This chart construction could become a bearish rectangle (requiring a close below the Sep 2011, Dec 2011 and May 2012 lows) or become a bullish rectangle (requiring a close above the Nov 2011, Mar 2012 and Oct 2012 Highs).
- The stage is set for a major move. A decisive close above 1800 would reestablish the dominant bull trend in Gold.
This is a historic chart of Gold that goes back over 200 years. How cool is this?
And finally, here is a chart that is near and dear to my heart. I talk about the Dow/Gold ratio all the time (see Yahoo Finance & Reuters), but the good folks at Chartoftheday.com sent over a nice updated one this week:
“For some perspective on the long-term performance of the stock market, today’s chart presents the Dow priced in another global currency — gold (i.e. the Dow / gold ratio). For example, it currently takes less than a mere 7.5 ounces of gold to ‘buy the Dow’ which is considerably less than the 44.8 ounces it took back in 1999. Priced in gold, the Dow has been in a massive 12-year bear market. The current downtrend channel is the third of this bear market. While this latest channel is the least steep of the three, the Dow priced in gold has just failed to punch through resistance for the fourth time.”
Good stuff right?
J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He earned the Chartered Market Technician designation (CMT) and is a member of the Market Technicians Association.