Loading ...Dow/Gold Ratio Currently at Strong Resistance
Here is the Dow/Gold ratio as represented by the popular ETF’s DIA and GLD. This ratio is currently testing the weekly upper trend line for the fourth time. Will it hold? The ratio is also testing the 200 week moving average which previously provided support in August 2019. This is strong resistance. A breach of this resistance to the upside could potentially lead to the ratio advancing above the high it achieved in Sept/Oct 2018. Whatever happens here, it should give up a good clue as to which asset the capital markets are going to favour this year: stocks or gold.
Thanks Neil
Very Important Chart to watch…keep us posted
The SPY:SLV ratio chart you previously posted is again back testing the breakout. Thanks again for the addition to my toolbox.
Thanks for the heads up on that. These stocks/PMs ratio charts are going to be useful in properly valuing the stock market in the future. If you read John Hussman’s analysis, you’ll see that he believes the stock market is now more overvalued than at any point in American history, including 1929. So it would kind of surprise me if these ratios are able to break up through that resistance.
JH is a permabear. Reminds me of Alan Abelson of Barron’s who was bearish the Dow from 700 in 1980 all through his career. He wrote so well they let him write his weekly post for decades.
Yeah, I agree with his valuation measurements, but I think he underestimates the effect that inflation will have upon the nominal prices of stocks in the future. In other words, I’m expecting a smash up in commodities and consumer goods, rather than a crash down in stocks.
With real rates sub zero unlike 1929 how can we properly price anything? I believe stocks are trading vehicles without any connection to anything other than the emotion of the moment.
longer term chart I see the right shoulder forming
Wow, yeah, I see it too. Thanks for pointing it out. I might post a chart. Hope it plays out.
I’m a pessimist. How often do these trend lines actually do what would be natural in a bull market? For the PMs, they rarely do what they are supposed to do. I’m guessing we are going to get a large spike upwards in this ratio in the next couple of weeks before rolling back over in February. There is no such thing as an easy PM bull. Emotions are almost always driven to the absolute breaking point or just a little beyond before any reversal is seen.