Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Pre-COVID US Economy Wasn’t All That Great Either - 4th Dec 20
Bitcoin Breath Taking Surge - Crypto Trading Event - 4th Dec 20
Platinum Begins A New Rally – Gold & Silver Will Follow - 4th Dec 20
Don't Let the Silver (and Gold) Bull Shake You Off! - 4th Dec 20
Stronger Risk Appetite Sends Gold below $1,800 - 4th Dec 20
A new “miracle compound” is set to take over the biotech market - 4th Dec 20
Eiro-group Review –The power of trading education - 4th Dec 20
Early Investors set to win big as FDA fast-tracks this ancient medicine - 3rd Dec 20
New PC System Switch On, Where's Windows 10 Licence Key? Overclockers UK OEM Review (5) - 3rd Dec 20
Poundland Budget Christmas Decorations Shopping 2020 to Beat the Corona Economic Depression - 3rd Dec 20
What is the right type of insurance for you, and how do you find it? - 3rd Dec 20
What Are the 3 Stocks That Will Benefit from Covid-19? - 3rd Dec 20
Gold & the USDX: Correlations - 2nd Dec 20
How An Ancient Medicine Is Taking On The $16 Trillion Pharmaceutical Industry - 2nd Dec 20
Amazon Black Friday vs Prime Day vs Cyber Monday, Which are Real or Fake Sales - 1st Dec 20
The No.1 Biotech Stock for 2021 - 1st Dec 20
Stocks Bears Last Chance Before Market Rally To SPX 4200 In 2021 - 1st Dec 20
Globalists Poised for a “Great Reset” – Any Role for Gold? - 1st Dec 20
How to Get FREE REAL Christmas Tree 2020! Easy DIY Money Saving - 1st Dec 20
The Truth About “6G” - 30th Nov 20
Ancient Aztec Secret Could Lead To A $6.9 Billion Biotech Breakthrough - 30th Nov 20
AMD Ryzen Zen 3 NO UK MSRP Stock - 5600x, 5800x, 5900x 5950x Selling at DOUBLE FAKE MSRP Prices - 29th Nov 20
Stock Market Short-term Decision Time - 29th Nov 20
Look at These 2 Big Warning Signs for the U.S. Economy - 29th Nov 20
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
BLOCKCHAIN INVESTMENT PRIMER - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Precious Metals Investors Sit Tight - The Dow / Gold Ratio Story

Commodities / Gold & Silver Feb 04, 2008 - 04:24 PM GMT

By: Captain_Hook

Commodities Best Financial Markets Analysis ArticleDon't say you were not warned. Warned about what? The coming depression in the global economy perhaps? No – that's not what I am referring to; however, this should be a very big concern to all never the less. Could it be an impending derivatives debacle emanating in the States due to an unexpected bond market implosion brought about by investor concern? No – that's not it either; but again, this is an item everybody should be concerned about considering implications for housing, credit markets, and the economy at large in turn. And certainly these are all legitimate and significant concerns worthy of warning.


The following is an excerpt from commentary that originally appeared at Treasure Chests for the benefit of subscribers in January, 2008

So what could it be then? What's the big risk being warned about now? Answer: You are being warned not to trade out of you precious metals investments because although things appear stretched at the moment, conditions should get much more so after what should prove to be a relatively brief respite whenever it arrives. What's more, and as you will see below, I am not suggesting the present move cannot get more stretched as well. In fact, I think this is exactly what will happen in coming days. And while I could always be wrong, a great deal of technical evidence associated with both weekly and monthly charts encompassing the entire precious metals complex is suggestive things are just getting rolling, and that while messages evident on daily plots (and some weeklies) should not be ignored by shorter-term traders, all other positions should remain in tact for the big payoff coming down the pike.

What this means is increasingly people who have been ignoring warning signs like the ones listed above should soon be ‘finding religion' as it pertains to a prognosis for the future that more closely resembles reality. And when they do, gold will become a far more important part of their investing focus, likely to the point of manic proportions in the end. In the meantime however, and in monitoring the progress of the bull market in gold, the attached Elliott Wave Count continues to appears to capture the essence of the move, which calls for far higher prices in the end. How high can prices go in the end? Well, according to Nick Laird at Sharelynx.com , if a realistic inflation rate history were used to adjust the gold price in today's dollars, such as the one provided by  shadowstatistics.com (SS) , prices should be heading up to $5000 eventually. (See Figure 1)

Figure 1

Returning to the present once again however, and in endeavoring to forecast the strength of the current impulse, it appears the Baltic Freight (Dry) Index (BDI) is beginning to accelerate lower at present, which at first should have a positive reaction on gold prices, and then negative. The initial positive reaction would be rooted in the discounting of an accelerated ‘need for speed' in monetary debasement rates, which is exactly what should happen in days to come as monetary authorities react to a perceived threat of deflation. And then once this buying power runs out, and prices start falling, deflationists will take this as a sign the sky is falling; possibly driving gold prices lower than need be. If we use Alf Field's preferred count / projections attached above, gold should top out soon just shy of $1,000, and then drop back to the $830 area if history is a good guide. Of course if we use a traditional 3-box point and figure chart , gold counts up to $1,170 this move based on the strength of the present impulse. Thus, we have a range in play based on these two parameters, with the big message here being ‘don't sell' as we are in Primary Wave III higher, where corrections should typically be relatively shallow, and advances potentially more robust than anticipated.

You know to a degree I should just wrap things up here today due to the importance of this last statement for most, that being sit tight with the majority your precious metals investments through any impending corrections in Primary Wave III due to unpredictability, but for those who insist on attempting to catch the swings under such circumstances, we can help you too. As you may know, this cannot be done by simply looking at a gold chart however, where for example the weekly gold plot is now exhibiting negative divergences in key indicators, but as per above prices can run far further than such influences suggest. No – to do this we must employ ratios in measuring key inter-market relationships that give us a better idea of just how much pressure still needs to escape the pipe. And in this respect we have two measures that should be brought to your attention. First is the Gold / US Dollar ($) Ratio , which currently has a Fibonacci resonance based target of approximately 13 (not far away now). And then we have the old standard that appears to still be doing the job handily, the Dow / Gold Ratio , which as suggested in the title of this essay, is telling the story.

What does this mean? It means that although nominal price extremes may vary, meaning the absolute top in gold and bottom in the Dow might not correspond to a low in the Dow / Gold Ratio, in general an intermediate-term degree reversal in these trends should be signaled at major inflection points, which in this case would be a reading of approximately 10 if the long-term monthly plot attached directly above provides us with any predictive value. The reason 10, the round number, should provide support is because on the way up this metric provided stiff (multi-year) resistance, which means on the way down it should provide commensurate support if history is an indication in such circumstances. What's more, this view is supported by the fact this an election year, meaning monetary authorities will put the ‘pedal to the metal' as far as the printing presses are concerned, which in turn is supported by the view stocks should find a bottom in March at a crash low, as suggested in our analysis last week .

Applying this to what we know about the Dow's structured top, where now that the diamond has broken to the downside we can talk about a downward slanting head and shoulders pattern measuring to 10,800, we know that a move to this level is quite possible, which of course puts gold far closer to an $1,100 interim top using a Dow / Gold Ratio of 10 as opposed to $1,000, which most people are looking at due to the fact hurdling this measure puts pricing into four-digits. (Apologies for the length of that sentence.) And wouldn't you know it, $1,100 is right in the middle of the range identified earlier, which would make it a ‘moderate view' then on this basis. So again, for those of you who must trade this top,$1,100 looks as good as any other guess, but please remember this is only a ‘guesstimate' based on the above analysis. If the Dow were to plunge lower, or bottom higher, obviously results will vary. In this regard, I suggest you stay tuned to our ongoing analysis of prospects for the stock market.

Just as an aside, which I will throw in here as it's good a place as any, you may remember me discussing merits of the Horizons BetaPro S&P/TSX 60® Bear Plus Fund if the global growth metric were ever to come into question in consideration to Canadian equities (largely oil based) which are currently trading as if they are immune to global credit related contagion. Based on technicals displayed in the plot below, this belief system should get questioned any day now with a break higher (lower for the TSX 60), where although I am not forecasting much more than a normal 10-percent correction in the index at this point, things could get more interesting by March. This fund makes for a good hedging instrument for non-aggressive investors, and the timing looks right on cue at the moment, as was our call on FXP last week. For risk averse investors who buy here then, an exit at $24.50ish appears appropriate. (See attached .) (See Figure 2)

Figure 2

HXD topped out at $16.50 four days later.

Unfortunately we cannot carry on past this point, as the remainder of this analysis is reserved for our subscribers. However, if the above is an indication of the type of analysis you are looking for, we invite you to visit our newly improved web site and discover more about how our service can help you in not only this regard, but on higher level aid you in achieving your financial goals. For your information, our newly reconstructed site includes such improvements as automated subscriptions, improvements to trend identifying / professionally annotated charts ,   to the more detailed quote pages exclusively designed for independent investors who like to stay on top of things. Here, in addition to improving our advisory service, our aim is to also provide a resource center, one where you have access to well presented ‘key' information concerning the markets we cover.

On top of this, and in relation to identifying value based opportunities in the energy, base metals, and precious metals sectors, all of which should benefit handsomely as increasing numbers of investors recognize their present investments are not keeping pace with actual inflation, we are currently covering 68 stocks (and growing) within our portfolios . This is yet another good reason to drop by and check us out.

And if you have any questions, comments, or criticisms regarding the above, please feel free to drop us a line . We very much enjoy hearing from you on these matters.

Good investing all.

By Captain Hook

http://www.treasurechestsinfo.com/

Treasure Chests is a market timing service specializing in value-based position trading in the precious metals and equity markets with an orientation geared to identifying intermediate-term swing trading opportunities. Specific opportunities are identified utilizing a combination of fundamental, technical, and inter-market analysis. This style of investing has proven very successful for wealthy and sophisticated investors, as it reduces risk and enhances returns when the methodology is applied effectively. Those interested in discovering more about how the strategies described above can enhance your wealth should visit our web site at Treasure Chests

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, as we are not registered brokers or advisors. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

Copyright © 2008 treasurechests.info Inc. All rights reserved.

Unless otherwise indicated, all materials on these pages are copyrighted by treasurechests.info Inc. No part of these pages, either text or image may be used for any purpose other than personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission, in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal use, is strictly prohibited without prior written permission.

Captain Hook Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules