Two Disturbing Gold Charts (GLD, IAU, GDX, GDXJ, GG, ABX, KGC, AUY)

Przemyslaw Radomski: So, gold didn’t move below $1,500 and it rallied recently – the worst is behind us, right? It might be, but there are reasons to think otherwise and in today’s essay we will feature two charts (courtesy by http://stockcharts.com) that should make you think twice before investing your whole capital in the gold market.

The first one features the Dow:Gold ratio.

The ratio appears to have broken above the declining resistance line. This is a bearish sign for gold relative to stocks, as it indicates that stocks will outperform the yellow metal. Please note that gold topped when this ratio bottomed and as the latter rallied, the former declined.

The ratio consolidated in the past few months (as gold did), but since the consolidation took place above the declining resistance line, it confirms the breakout and makes the situation more bullish for the ratio and more bearish for gold. Unfortunately (for those who “like” gold – we fall into this category), the next resistance level is quite far from where the ratio is today and this translates into a possibility of a significant decline in gold.

The second chart for today is the ratio of gold to prices of corporate bonds.

In short, this ratio tells you how gold performed relative to corporate bonds. This chart provides a clear bull market picture with several more or less significant corrections along the way. The “problem” here is that gold has broken two major support lines and has been trading below them for several weeks, which means that these breakdowns were verified.

This suggests that the decline is quite likely to continue and since this ratio moved very much in tune with the price of gold (no wonder – gold is in the numerator of the ratio), it serves as an indication that gold might decline as well.

Summing up, positive long-term fundamentals for gold are in place and we will most probably see much higher gold prices in a few years, however, the medium term is not that clear and we believe that caution is necessary.

To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Sign up for our gold & silver mailing list today and you’ll also get free, 7-day access to the Premium Sections on my website, including valuable tools and charts dedicated to serious PM Investors and Speculators. It’s free and you may unsubscribe at any time.

Thank you for reading. Have a great weekend and profitable week!

ETF DN Related Tickers: SPDR Gold Trust (NYSEARCA:GLD), Market Vectors Gold Miners ETF (NYSEARCA:GDX), Market Vectors Junior Gold Miners ETF (NYSEARCA:GDXJ), iShares Gold Trust (NYSEARCA:IAU), Goldcorp Inc. (NYSE:GG), Barrick Gold Corporation (NYSE:ABX), Kinross Gold (NYSE:KGC),  Yamana Gold (NYSE:AUY).

Written By Przemyslaw Radomski From Sunshine Profits

Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio? Sunshine Profits provides professional support for precious metals Investors and   Traders.  Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits’ Premium Service gain access to Charts, Tools and Key Principles sections. Click the following link to find out how many benefits this means to you. Naturally, you may browse the sample version and easily sing-up for a free weekly trial to see if the Premium Service meets your expectations.

Leave a Reply

Your email address will not be published. Required fields are marked *