Gold is headed for another test of primary support at $1525 after breaking support at $1625. Breach of $1525 would signal a primary down-trend. 63-Day Twiggs Momentum breakout below -10% would strengthen the signal, while reversal above zero would suggest further ranging between $1500 and $1800.
Brent Crude remains above $117/barrel, signaling a primary up-trend. Recovery of Nymex WTI above $99/barrel would confirm. Narrow consolidation below the resistance level is a bullish sign.
* Target calculation: 116 + ( 116 – 106 ) = 126
The gold-oil ratio is falling. Decline below 10 is a long-term buying signal for gold. In recent years fluctuations have been a lot narrower and a fall below 12 may be sufficient.
I am not yet convinced that gold is headed for a primary down-trend. Watch out for bear traps. Respect of primary support around $1500 seems as likely — and would present a buying opportunity.
Thanks Colin, the view from your perspective is appreciated.
If the Gold to Crude ratio is low, why does it have to mean Gold rising that corrects the ratio?
Look at the last time the ratio was at 13, back in the Spring of 2012. When the ratio leapt back up to 17, it was because oil dropped by 25%.
So it could just as well be a potential sell signal on oil, as opposed to a growing buy signal on gold.
A falling ratio can be caused by gold falling or oil rising. The significance of the ratio is that when oil prices are high, demand for gold increases and when oil prices are low, demand falls.
I am a retired T.A. from Lyall & Evatt brokers in Singapore & ADIA in Abu Dhabi. I subscribe to Updata T.A.Systems in London & would be happy to email you occasional charts if interested, esp. P&F, which you do not seem to use. I like your work.
Best Regards – Mickey Bain (near Paris)
TA contributions would be appreciated. Use the Contact Us button to send files and images. Regards, Colin