Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
Gold & Silver Prices in

Is Gold Becoming a Risk-off Asset?

IMG Auteur
Published : February 18th, 2013
561 words - Reading time : 1 - 2 minutes
( 1 vote, 5/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...

Lately we've been writing about the negative correlation between the equity market and the precious metals market. This phenomenon has been in place since summer 2011 and has re emerged in the past few months. Since November 23, the S&P 500 is up 8% while the gold shares are down 14%, Silver has lost 11% and Gold 7%. For those who have studied history this should not come as a total surprise. From 1972 to 1977 and November 2000 to July 2002, precious metals and the equity market trended in opposite directions. We've postulated that precious metals and the mining shares won't begin a new bull phase until the cyclical bull market in US equities ends. We don't expect that to happen immediately but there are some important signals beneath the surface (with the safe-havens) that we should direct our attention to.

First, let's take a look at the recent activity in a number of markets. From top to bottom we plot Silver, Gold, GDX, TLT and the US Dollar. The first three markets have been in a downtrend since the end of September. Meanwhile, TLT and the buck began their downtrends in the middle of November. It appears that these markets have been tightly connected since the end of November. That is the bigger picture. The short-term term picture shows the US$ potentially breaking out and bonds not breaking to a new low.

24hGold - Is Gold Becoming a R...

Meanwhile, we should take note of the action in some other markets since late November. Both emerging markets (EEM) and the S&P 500 have advanced, but EEM is slowing down. Commodities failed to make a new high even as the US$ made a marginal low. As we can see, the inverse of the buck is threatening to breakdown and realign with commodities and CEF, a fund which is half Gold and half Silver. The rally since November is now seeing a negative divergence as emerging markets have not made a new high and the US Dollar could be breaking out.

24hGold - Is Gold Becoming a R...

The bottom line is the action in precious metals, commodities and the US$ is signaling a warning for the equity market. The bond market needs to confirm this warning and if it does it could be the catalyst for a selloff in equities. Keep in mind, the S&P 500 is approaching strong long-term resistance while in a state of euphoric sentiment. If you don't believe that, check the recent sentiment surveys and ignore those who don't provide hard data. By the way, public opinion on bonds (from sentimentrader.com), is only 14% bulls! Sounds like we should sell bonds and buy stocks, right?

Meanwhile, the precious metals appear likely to test major support in the coming days and weeks. There will be some more pain but things are setting up perfectly for the next cyclical bull market. Gold is positioning itself contrary to risk-on assets. It has detached from the stock market and that is a good thing. There will likely be a transition period as precious metals find a bottom and the equity market reaches its peak. For now, look to buy precious metals if they reach an extreme oversold condition next week.

Good Luck!

As for the gold stocks, if you'd be interested in professional guidance in uncovering the producers and explorers poised for big gains then we invite you to learn more about our service.

Companies Mentionned : Catalyst | Metals X |
<< Previous article
Rate :Average :5 (1 vote)
>> Next article
"Trendsman" is the proprietor of Trendsman Research, which provides financial and investment related research to private and public entities. Trendsman Research provides: a subscription based newsletter to individuals, personalized research to individuals and institutions and occasional reports available to the public. Trendsman is an affiliate member of the Market Technicians Association (MTA) and has successfully completed the CMT Program (awaiting certification) which certifies professionals in the field of technical analysis.
WebsiteSubscribe to his services
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Here's What Will Send Oil Prices...
05 Marovertheedge
"Admittedly there has been a production surplus since the beginning of 2014 but that is nothing new and is forecast to be back in balance by the en...
Another Clinton Scandal
05 Marovertheedge
O, Mr Hoye you must have really infuriated the Clintonistas. Before I voted, you only had 1 vote that was a one star. I tend to think ...
Apple's iWatch and Some Crazy Go...
05 Marovertheedge
Oooo, let me think about this. I have forward guidance about gold-bearing Timex® equivalents that are supposedly gonna be made by Apple/Foxconn...
Financial Repression Authority w...
03 Marovertheedge
"The US is only about 50% of global market cap but most US investors have a 'hometown bias" of having 70% of their portfolio in US securities. Fabe...
Bondholders “Bailed In” In Austr...
03 Marovertheedge
"“Bail-in is now the rule” as Irish finance Minister Michael Noonan warned in June 2013. Noonan admitted that the move to not maintain deposits as ...
Bondholders “Bailed In” In Austr...
03 MarArgus
Shortly after the Cyprus test run, Canada's budget document made provision for bail-ins in the event of significant 'systemic risk' to the banking ...
Illinois Pension Plans 39% Funde...
02 Marovertheedge
And it gets even worse. The unfunded pension liability monies aren't invested and never will be. You can't pay pensions out of an unfunded ...
China is about to overthrow Lond...
28 Febneville
This a good slap in the face for the downright crooked bullion banks,traders that have been front running ie algorythm trading etc It had to ta...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
TristarTOG.TO
TORC Oil & Gas Ltd. Announces 2014 Fourth Quarter and Year-End Financial & Operating Results
CA$ 10.17+2.52%Trend Power :
Financials
Altius Min.(Ag-Au-Co)ALS.TO
and Callinan combination to create a diversified mining royalty company leader
CA$ 12.05-4.89%Trend Power :
Corporate news
Tahoe ResourcesTHO.TO
Declares Third Monthly Dividend For 2015
CA$ 16.23+1.37%Trend Power :
Corporate news
Sprott Resources(Ag-Au-Co)SCP.TO
Resource Corp. Announces 2014 Annual Results
CA$ 1.28+2.40%Trend Power :
Corporate news
Vista Gold(Cu-Le-Zn)VGZ.TO
. Announces 2014 Results and Provides Update on Recent Activities
CA$ 0.47+11.90%Trend Power :
Corporate news
Major DrillingMDI.TO
Announces Third Quarter Results and Declares Dividend
CA$ 6.43-0.16%Trend Power :
Corporate news
UR-Energy(Ur)URE.TO
Releases 2014 Year End Results
CA$ 1.32+14.78%Trend Power :
Financials
Rockwell(Cu-Gems-Ni)RDI.TO
Announces Filing of Preliminary Short Form Prospectus
CA$ 0.22-13.46%Trend Power :
Corporate news
Cardero Res.(Ag-Au-Cu)CDU.TO
Announces Proposed Reverse Takeover of Artha Resources
CA$ 0.03-14.29%Trend Power :
Corporate news
Goldcorp(Cu-Le-Zn)G.TO
declares third monthly dividend payment for 2015
CA$ 25.88+1.69%Trend Power :
Corporate news
Comments closed
Subscribe to 24hGold’s daily market briefing
  • Prices and data of precious metals in 119 currencies and world mining companies
  • Daily analysis of the economy, markets and more
  • Free, daily and indispensable
Stay informed, subscribe now !
* Your email will never be shared.