Loading ...Small Caps vs Gold: Bullish Long Term View
The Russell 2000 looks like a better investment than Gold, at least for now as the $RUT:$GOLD ratio defended the 1.0 Parity Line on Christmas Eve 2018.
In addition, 2016 saw the backtest of a 14 year downtrend on $RUT:$GOLD that began at the 2000 peak.
RUT’s linear nominal chart reveals a possible backtest of two long term support lines that occurred in December 2018.
If the bull market resumes, a long term upside target for $RUT:$GOLD is 2.0. Back in 2000, the Russell 2000 was priced at twice the value of an ounce of Gold. If the $RUT:$GOLD ratio falls below 1.0, I will begin to favor Gold over small caps. For now I favor the small caps. -Harry
I know there are different $Gold monthly charts out there, but if one draws a line from the ’01 low, it would currently show the ’18-’19 lows as hitting that line and bouncing up. You have a negative spin chart, but the positive is equally likely. To say we are at a crossroads in the markets is an understatement! I also think it’s possible general markets and gold could rise together for a while, especially if the dollar falls, interest rate hikes are slowed (being broadcast by the Fed), and the Fed slows its balance sheet reductions (begin decisions this year on that program).
Yes! Dollar dumping which causes both markets and Gold to rise together would be the best case scenario for an investor. If I’m going long the Russell 2000 index, and I think the $RUT:$GOLD ratio will re-test 2.0, then I want Gold to rise as much as it can. 10K/oz Gold would mean 20K valuation for the Russell 2000 at the 2.0 ratio level!
If Gold falls to 1000/oz, then that limits the upside target of the $RUT to just 2000, keeping that 2.0 ratio.
Gold isn’t the enemy of my greed. A strong US Dollar is! 🙂
Also interesting, usually Republican presidents lead to a falling dollar over the last 30+ years (Stewart Thompson has a good chart) … maybe it is beginning to roll over here with the Fed’s “patience” in adding more rate increases? Time will tell.
precarious spot. Dr. Copper still looking sick. China still has good growth #’s, not like the old days but still better than usa. I google their cities often and say omg look at all the hgh rises, infrastructure, high speed rail…. when was the last time a big new highway got built/fixed in North America????
https://www.techspot.com/news/77995-check-out-195-gigapixel-image-shanghai.html
That reminds me of the “One Belt One Road” ETF (OBOR) that targets Chinese infrastructure. Looks to be carving out a bottom on its chart. On my watch list but I haven’t bought.
https://kraneshares.com/obor/
Lots of high-rises in China but is anybody IN those high-rises. I doubt it. Lots of ghost cities built in China solely to keep the peasants working. China is massively over-indebted and almost totally dependent on exports. I don’t know of a China-watcher that believes their GDP is over 6%. More like 2% or close to zero. China will be leading the global economic slowing now underway.
To me that view is counter what I would think. There are many financials in the index. Wouldnt rising bank stocks and rising interest rates imply a stronger dollar. Banks make more money with higher rates.