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Gold's new leg of outperformance against Equities?



July 21, 2011 – Comments (3)

Looks like it to me:


Now keep in mind this is a ratio chart. If the trend projection plays out, it does not necessarily mean that Gold will go up in price. Nor does it mean that the SPX will go down in price. It just means that Gold will do better than the SPX on a relative basis. This could mean: 1. Gold rises faster than the SPX, 2. Gold goes up while the SPX goes down, 3. Gold goes down but less rapidly than the SPX. All three are viable scenarios if the Gold/SPX ratio is in a rising trend.

3 Comments – Post Your Own

#1) On July 21, 2011 at 10:43 AM, ElCid16 (98.07) wrote:

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#2) On July 21, 2011 at 7:06 PM, Frankydontfailme (27.20) wrote:

Binve, thanks for posting this. I see these charts a lot, and I have trouble reading them. Will you explain to me the significance of the bottom and top charts? Are these compressed versions of gold/S&p so we can separate the relationship over time periods?


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#3) On July 22, 2011 at 12:22 AM, binve (< 20) wrote:

Frankydontfailme ,

No problem. The bottom indicator are Stochasitcs, which is an overbought/oversold oscillator. In this case it is not providing much useful information, but I left it on anyways.

The top indicator is the PPO - Percentage Price Oscillator, which tells you deviation away from EMAs. The key to this trend is to realize that Gold always has emotional breakouts especially at the end of trends, either in raw price or relative to other assets. The spike on the PPO in 2008/2009 was 13%, but not becuase Gold was spiking up but because the SPX was crashing. What we see are price increases while the PPO is also increasing, which means there are no divergences => the trend is still healthy. This is why I think we are seeing another breakout now after then previous consolidation, because the uptrend is still intact...

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