When Will Gold Make Its Next Big Move?


Before gold can embark on an impulsive move, investors will need to favor gold over stocks. . .

In recent commentaries, we've focused on the macro factors that will drive acceleration in the precious metals sector. Namely, the gradual exodus from both government and corporate bonds as authorities are forced to monetize debts in an effort to avoid rising interest rates, which would hasten default and bankruptcy. This, and not bank lending or consumer demand, is the cause of severe inflation.

Predicting the timing is more difficult than the actual event. Luckily for our subscribers, we constantly pour over numerous technical charts and sentiment indicators in order to advise as to favorable entry and exit points. In analyzing gold, we find that intermarket analysis is an essential tool. Intermarket analysis is analyzing a market by comparing it to other markets.

For gold, the first study is a comparison with the S&P 500. In this chart I show gold next to the Gold/S&P 500 ratio.

Gold/S&P 500 ratio

Every large or impulsive advance in gold was accompanied by a similarly large move in the Gold/S&P 500 ratio. Currently, the short-term trend for gold is higher but the trend for Gold/S&P 500 is lower. Simply put, before gold can embark on an impulsive move, investors will need to favor gold over stocks. Gold can only rise so much if money is moving into stocks at the same time.

Another important and obvious example is the U.S. dollar. In the chart, we show gold plotted next to the inverse of the U.S. dollar.

Gold plotted next to the inverse of the USD

Gold can rise at the same time as the USD. We all should know that by now. Also, gold can perform very well even if the USD is flat. However, the point here is that as long as the U.S. dollar is rising, it will be difficult for gold to embark on its next impulsive advance.

Relatively speaking, gold is performing well against other markets like commodities, various currencies and treasury bonds. However, it is clear that the yellow metal will need to regain its footing against stocks and the U.S. currency will need to peak or pause for months before we can expect gold to make an impulsive advance to $1,500 and beyond.

In our premium service, we dedicate ourselves to analyzing technical and sentiment factors so that we can keep our subscribers ahead of market developments. Moreover, we combine technicals and fundamentals to help traders and investors find and stay in the best junior companies. If this would interest you, then consider a no risk 14-day free trial at our website.

Jordan Roy-Byrne
[email protected]

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