NFTRH; Gold Ratios & Implications

The real or asset adjusted price of gold continues to make positive progress in several areas.  Below we update gold ETF GLD vs. a few other asset classes, primarily commodities, which makes up the ‘real’ price of gold and the big picture macro plan per the top pane of this chart.  If Au-CCI remains strong, the S&P 500 (lower panel) would be expected to weaken again at some point.

au.cci

As for GLD-SPY we see the ratio in a bullish looking flag testing its break above the MA 50.  Gold needs to do more work against the S&P 500 for gold mining to gain more favor from the average investor.

gld.spy

GLD vs. DBC (commodity ETF) remains on its bullish run as commodities break down further today.  Inflation concerns?  Not many to be found yet, and the first chart above is gaining again.

gld.dbc

GLD-USO remains strong and the higher this goes, the better for the gold mining industry.  Remember though that it is starting from a very low level and has more work to do, perhaps after working off the developing over bought status.

gld.uso

GLD vs. the Base Metals ETF is constructive to be putting in a potential bottom.  The recent low must hold.

gld.dbb

Finally, GLD vs. SLV is somewhat over bought.  This one is different than the above since the above ratios are positive for gold mining either fundamentally (commodities) or psychologically (stock market) but the gold stock sector often rises when gold declines vs. silver.  Of course it would be important for silver to go up more than gold rather than decline less.

gld.slv

Bottom Line

We remain in the grind of a potential gold stock sector bottom with some good signs continuing this week.  There is a disturbance with some silver company’s reporting earnings that the market did not like (SLW, AG, FSM…) but silver is either going to fail soon or find a bottom and turn up, in which case these backward looking earnings issues will prove to have been transitory.

Our theme here is gold however, and its relation to assets.  If the first chart above continues to rise, things could get bumpy around the asset market spectrum.  That is not my opinion talking, it is the chart talking.  Reference the rise to point 1 in 2008 (US financial crisis) and the rise to point 3 in 2012 (Euro crisis).

That bumpiness would go along with the conditions that improve gold sector fundamentals although ironically, the ride could be bumpy for the gold stocks too in an atmosphere of cyclical change.

More on events in this weekend’s report after we see how the week closes out.