Revisiting
the Dow-Gold Ratio
Gary Tanashian
Nov 13, 2006
In light of today's early going,
where gold is being blown up in London (pre-NY open), I thought
I would take the pulse of the current Dow-Gold Ratio. Gold has
recently done some very bullish things vs. the Dow as evidenced
by the short-term (daily) chart. The trend has changed and bearish
divergences have developed for stocks vs. gold. All's well apparently
in Goldbugville. Not so fast...
The weekly chart shows a different
story. Stocks still have not met their secular downtrend
line vs. the yellow metal and in fact have not lost their uptrend.
No sign of bearish divergence either.
The US Dollar is at a critical
juncture and the bond market is trying its best to re-inflate
Goldilocks (yield curve relentlessly declining). Combine this
with a notable upturn in sentiment in the gold sector (newsletter
writers are bursting with bullishness including some who were
notably bearish until recently) and we have the makings of a
correction at the least. Our targets of 605 +/- for gold and
309 to 319 for HUI are back in play. While stocks may simply
decline less than gold, it would not be surprising to see additional
upside here for all things paper.
At this point, I will call
this an opportunity for:
a) buyers who missed the initial
leg up to take gold sector positions and
b) the gold complex to shake
off the fleas so to speak and eventually head higher with the
strongest of holders. Meanwhile, prepare for some volatility.
The word volatility is always easier to write than to
sit through. Keep that in mind.
Please note you can visit the
blog for ongoing
and up to date analysis as the Biiwii Letter has been scaled
back due to time constraints.
Gary Tanashian
email: info@biiwii.com
321gold
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