Long on Gold Stocks Yet?

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The gold-to-XAU ratio stood at 4.65 times at the close of trading on Thursday, a level which offers the promise of positive returns on current investments in gold stocks, if held for a year.

Gold bullion's recent moves to 16-month highs just below $700 an ounce has been driven primarily by anticipation of imminent Federal Reserve directed reflation and related weakness in the dollar, says Myles Zyblock, chief institutional strategist at RBC Capital Markets.

Zyblock says that this combination is helping to "set the stage for the next leg up" in gold and gold stocks. "Meanwhile, the macro backdrop is coming into alignment with what is a seasonally strong period of the calendar for bullion".

RBCCM points to a certain indicator as still being "in the sweet spot". This ratio uses the dollar gold price, and the XAU, a US index comprising a number of gold and silver stocks. The ratio stood at 4.65 times at the close of trading on Thursday, a level which offers the promise of positive returns on current investments in gold stocks, if held for a year.

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