Loading ...XAU to Gold ratio daily watch
XAU to gold ratio has been a reliable leading indicator for PM sector miner and gold price.
Back in Aug 2015 to Jan 2016 the ratio put in a significant bullish divergence which led to a breakout and back test.
The ratio rose from 0.042 to 0.085. That is 2 times. During the time many miners rose from 100 % to 600% in first six months.
The current consolidation/correction following a fabulous rise has ended with a breakout out of bull flag.
Once again this indicator chart shows many bullish signs those can not be ignored.
– Bullish divergence
-wolf wave
-RSI rising and above 50
A break out from the bull flag has happen and ready for back test in few days.
Once BT is complete the ratio may rise again to new high resulting in great performance of miners similar to first half of 2016. ( may be). May be the next target at 0.10.
Lately no one has talked about the seasonality of gold. Gold is entering strong season from Jan to March high.
Adam Hamilton at Zeel on Hui to Gold ratio in recent post:
“On the day after the Fed’s hawkish surprise last month, the HGR fell to 0.145x. In other words, the HUI closed at 14.5% of gold’s close. Outside of the extreme record HGR anomalies seen in the last half of 2015, that was among the lowest HGR levels ever. Back in mid-January 2016, the HGR briefly fell to an all-time low of 0.093x. But such crazy lows are unsustainable sentiment-driven anomalies, temporary distortions.
As of the middle of this week, the HGR has still only recovered to 0.165x. From 2009 to 2012, which were the last normal years between 2008’s stock panic and 2013 when the Fed’s radical QE3 started to levitate the stock markets and crush gold, the HGR averaged 0.346x. So merely to mean revert back up to normal levels relative to today’s prevailing gold prices, the HUI still needs to rally another 109% from here!
But that’s far too conservative for a couple major reasons. All mean reversions out of extremes tend to overshoot proportionally in the opposite direction. So the abnormally-low HGR levels in recent years driven by extreme fear will almost certainly yield to abnormally-high levels in coming years fueled by excessive greed. A proportional overshoot yields a topping HGR target of 0.599x, for another 262% HUI rally.”
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A mean to HGR target of 0.599x from current low of 0.09x is huge for PM sector.
We don’t need Adam Hamiltlon , ( he is a permabull)
Your Analysis of this ratio is Fantastic Bikko !
Now that’s a Wolfe Wave we can believe .
Please keep us posted .
Excellent chart, Bikoo. I don’t believe Hamilton is a permabull, with due respect to Fully. I have seen him many times say that PMs were overbought and it was time to sell.