DOW GOLD RATIO - Key Breakdown
We may have just seen a key breakdown in the Dow/ Gold Ratio.
This would signal that the period of sustained out performance of stocks over gold, and indeed precious metals as a whole may be nearing an end.
As you can see on the left hand chart, a monthly cross of the 10 and the 50 moving averages was a strong tell that the trend had reversed, interestingly, this cross occurred several years after the peak in stocks.
We may be about to witness a similar signal today, this is predicated on the cross taking place, of course.
in the more immediate future, i would hazard a guess that stocks will stage a strong short covering rally, before petering out, unless there is news related to either progress on containing the Coronavirus or on global CBs mounting an even more desperate attempt to prevent the deflation that is bound to stem from the virus' impact on global supply chains.
That being said, free money will not produce more goods or services, and will most likely signal higher than anticipated inflation in the future, particularly once the virus is contained, more than likely driving gold higher on more traditional inflation fears.
To the right we can see a weekly chart, highlighting the severe technical damage that has been done, with the ratio below the 200 weekly moving average.
All of this with a backdrop of the gold silver ratio hitting over 100 in the last day or two, makes for quite a bullish environment for precious metals and a rather bleak outlook for equities.
This would signal that the period of sustained out performance of stocks over gold, and indeed precious metals as a whole may be nearing an end.
As you can see on the left hand chart, a monthly cross of the 10 and the 50 moving averages was a strong tell that the trend had reversed, interestingly, this cross occurred several years after the peak in stocks.
We may be about to witness a similar signal today, this is predicated on the cross taking place, of course.
in the more immediate future, i would hazard a guess that stocks will stage a strong short covering rally, before petering out, unless there is news related to either progress on containing the Coronavirus or on global CBs mounting an even more desperate attempt to prevent the deflation that is bound to stem from the virus' impact on global supply chains.
That being said, free money will not produce more goods or services, and will most likely signal higher than anticipated inflation in the future, particularly once the virus is contained, more than likely driving gold higher on more traditional inflation fears.
To the right we can see a weekly chart, highlighting the severe technical damage that has been done, with the ratio below the 200 weekly moving average.
All of this with a backdrop of the gold silver ratio hitting over 100 in the last day or two, makes for quite a bullish environment for precious metals and a rather bleak outlook for equities.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.