Some Quick Technical Notes On Gold Bugs

The following technical commentary on Gold comes from Tim Woods posted on FinancialSense.com.

• I have also been asked about gold and gold stocks. Well, I have been telling my subscribers for months that the evidence suggests that the 9-year cycle in gold has peaked, and through my eyes this is why gold has been declining. As for gold stocks, below I have a monthly XAU/Gold ratio chart along with my Trend Indicator. When price is moving up on this chart it is telling us that gold stocks are out performing physical gold, which is bullish for gold and the gold stocks. When price is moving down, the opposite is, of course, true. As an example of this, let’s look at the period between the May 1996 top and the August 1998 top. During this timeframe gold fell from roughly 410 to 271, or 35%. All the while, the XAU fell from 150 to 51, or 66%. So, as this chart suggested, the XAU was the weaker of the two. If we take the bullish period between October 2000 and May 2002, gold advanced from 266 to 331, or some 24%. But during that same period, the XAU advanced from 41 to 84, which was up some 105%. As this chart suggested during that timeframe, the XAU was the strongest. More recently, the monthly Trend Indicator turned back down in October 2007. This downturn served as a warning of a pending top in gold and gold stocks, which occurred in March 2008 at the 9-year cycle top. Since that time gold is off some 21% and the XAU is off just over 57%. So again, the downturn of price on this chart, along with the downturn of the monthly Trend Indicator, serves as evidence that we have been, and so far continue to be, in an environment in which gold stocks will be weaker than gold. This is in turn a bearish environment for gold and I do not look for this to change until we see an upturn on this chart that is confirmed by an upturn of the monthly Trend Indicator.

Source : It Still Ain't Gonna Work: Plus, A Quick Technical Look at Gold