Sunday, September 7, 2008

"Asses Prefer Garbage to Gold"*

let's take a quick survey of some markets charted relative to the price of Gold. some of these Trend & Value has mentioned before, at least briefly. (search the site or browse the archives for previous posts.)

the EEM/GLD ratio has started to fall off some again the last couple weeks and is looking pretty bearish, at least the way this P&F chart is drawn:



the SPY/GLD ratio has established a neatly defined range since the beginning of the year. this is perhaps the chart to watch the next couple months:



or maybe the USO/GLD ratio is the chart:



we'll call it a tie for now. I suppose that they could probe the support around 1.07 a few more times, but the more false supports, the more violent the eventual collapse.

did you Know that you would have been better off owning long-term Treasury bonds than gold for most of the last couple years? take a look at this chart of the TLT/GLD ratio:



(don't forget to factor in the yield on TLT versus the non-yield on GLD.) I wonder what the Inflation, or 'Stagflation' crowd thinks about that. (the answer is that they don't think, else they wouldn't be inflationists. but I have no affinity for deflationism either - so don't start trying to flirt with me!)

but...my hunch now is that Gold could start to do somewhat better than bonds here soon, and before all too long Gold could really start to out-perform bonds again. this doesn't mean that I'm going bearish on bonds, we're talking about relative performance here.

alright, that's enough for now, there's some other stuff I want to tackle this evening.

(as I post this Gold and Silver have popped up some during early Asian Trading. a London Fix for Silver of 12.50 or better would be quite delightful.)

*the title comes from Heraclitus (with permission...)