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Weak

Gold And The King: The True Story Of Opposites

Aibek Burabayev - INO.com Contributor - Metals


Dear INO.com Readers,

Recently, I have heard a lot of arguments about the correlation between major financial instruments and I decided to make special report for you to give some idea about their actual relationships.

For today’s analysis, I chose Gold, WTI Crude Oil ("black gold") and the Prime Currency’s DXY Index (King). I would guess all of you track these instruments from time to time to check the precision of your financial "compass." Most important here is to find out how sensitive Gold price is to fluctuations in Oil and Dollar value. To check that, let’s get down to our comparative historical dynamics charts depicted in different time periods.

Quarter Century Comparative Dynamics

Quarter century comparative dynamics chart

The 90’s look flat compared to the wild present day, only Oil managed to make a huge 80% spike in 1990, rising from the $20 level up to the $40 area. During those years, Gold and the Dollar index showed good and quite constant negative correlation, making opposite curves and charting ellipses. It worked nicely up until the crisis 2008 year, both instruments, by turns, had been changing sides and keeping an accurate inverse relationship. Oil is less predictable, first it was between Gold and the Dollar index correlation, but still positive with Gold and negative with the Dollar index, then in 1996 and in 1999-2001, it was in direct relationship with the Dollar index, but the rest of the time Oil reverted back to its normal inverse relationship. Bipolar might be the right definition for Oil.

The overall picture only looks stable for the Dollar index, which can be portrayed with the following expression, "Never shall those born to crawl, learn to fly." If we mention the instrument’s dynamics, which stayed in the range between -24/+33%, showing mirror reflections. 25-year dynamics indicate that the Dollar is quite stable with only above 1% gain, meaning that major currencies in total kept about their parity to the Dollar.

It’s quite an interesting discovery because as we see on the chart both hard "tangible" assets (I stress the word "tangible") gained weight significantly from 2 fold for Oil to 3 fold for Gold against the USD, with even more impressive peaks on the way. Another interesting note is that Gold and Oil have higher upside margins: 519% for Oil and 340% for Gold and comparatively small downside negative extremes: -54% for Oil and -42% for Gold, which means that asset inflation or actual revaluation tendency dominates. Fiat money lost its value to hard assets in triple digit percent numbers. That’s it with the sad but true part.

Post Crisis Comparative Dynamics

Post crisis comparative dynamics chart

As seen on the weekly chart above, Oil is a very tricky instrument. In 2008, just in one year it hit both margins: upside at +60% and then downside at -60% when the crisis emerged, moving an unthinkable 120% in between. From 2009 up to the middle of 2011, the Fed’s Quantitative Easing started a robust uptrend and positive correlation between Gold and Oil. In the meantime, the Dollar index had been behaving in its normal inverse relation, but only in 2009. In 2010, due to European debt crisis, half a year it had been moving in an uptrend with abnormal positive correlation with Gold and Oil. After that, the Dollar index returned to its usual role, being opposite to commodities.

I want to you to focus on the period between spring and autumn of 2011, when Gold’s bubble hit a historic record above $1900/oz, but Oil on the contrary, plummeted from a $114 high to a $77 low on weak economic data and deepening European crisis. It’s interesting to watch how the same fundamental reasons caused two different reactions. Feared investors put their money into Gold and at the same time they ran off the Oil. For me, it means that Gold’s safe haven function is mostly in a "sleeping mode" when both Gold and Oil just track the opposite direction from the Dollar index, although with different velocity. But when the world needs a hedge, Gold starts to be in high demand, seeking price’s ceiling and then all other tangible assets just dim.

Present Day Comparative Dynamics

Present day comparative dynamics chart

The above daily chart is last and represents the current situation in relationships between the three instruments. Briefly saying, Oil and the Dollar index have an almost ideal inverse relationship between each other compared to the sudden abruptions appearing with Gold. Abnormal correlations between Gold and Oil are highlighted in dark grey rhombuses, for one year one can count five distinct periods where these soil treasures move opposite directions.

As for the Gold and Dollar index correlation, we can see a good inverse relationship with several disconnections. Only in last November (highlighted in red ascending lines), Gold started to be in direct relationship with the Dollar index, with some deviations in Gold behavior when both instruments have been gaining value. Recent days' moves in Gold and the Dollar index are even more similar, highlighted in blue ellipses.

Bottom Line

Most of the time, Gold moves together with Crude oil, but opposite to the Dollar index. Still, history shows that we can’t rule out sudden abruptions in relationships where most often Gold and less often the Dollar index are the world’s safe haven assets, nowadays, due to currency wars.

Oil is the most Dollar index sensitive asset here and is utmost vulnerable amid fear, weak fundamentals and growing supply.

After all, you should be flexible with your approach as nowadays the world is changing so fast.

Lucky and Intelligent Trades!

Aibek Burabayev
INO.com Contributor, Metals

Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

3 Reasons Why You Should Be Watching Gold

Greece has once again "kicked the can down the road," but they may not be out of the woods yet according to the European Commission, European Central Bank and IMF, who have all warned Greece that action speaks louder than words.

That brings me to the point of today's blog posting, and that is action speaks louder than words. In our case, it is market action that speaks louder than Fed Chairwoman, Janet Yellen, or any other verbiage that comes out of a politician's mouth.

With that thought in mind, I'm going to take a look at the market action for all the major markets today, with a special look at gold (FOREX:XAUUSDO). I'll give you three reasons why you should be watching this market.

It would appear at the moment that many of the world’s disruptive events like Ukraine, Greece and the Middle East are all in a temporary recessionary mode at the moment. That leaves the markets themselves to determine their trends. Market action will always point the way to the next big moves as opposed to words and promises from world leaders.

Every success with MarketClub,
Adam Hewison
President, INO.com
Co-Creator, MarketClub

Global Insecurity Is Good for Gold, Says Mike Niehuser

The Gold Report: Gold and silver have both demonstrated explosive growth in 2015. Why has this happened, and will it continue?

Mike Niehuser: Well, I am not sure that I would categorize a higher gold price in the first part of 2015 as "explosive." Since the beginning of 2015, gold appears to be trading within a band of $1,200 to $1,300 an ounce ($1,2001,300/oz). While this is not "explosive" from a broader perspective, it is certainly a relief compared to declines in 2013, so let's just say gold has done well so far in 2015.

Despite declines over the last couple of years, gold is still well above its lows prior to Sept. 11, 2001. It has held up in spite of concerns for deflation resulting from a global economic slowdown. This has not been helped by loose monetary policies.

"Alexco Resource Corp.'s environmental business continues to grow and cover overhead while the company unlocks the exploration upside at Keno Hill."

I think the strength is in part due to what Sen. John McCain characterized as being in "an unprecedented period of global turmoil." Russia has reclaimed the Crimea and is in the process of annexing eastern Ukraine. The same could be said for insurgents in Iraq and eastern Syria. Concerns over the repayment of Greek debt, nuclear issues in Iran and an unsettled path for a maturing China should keep things interesting for gold.

Also, it is not clear how the recent collapse in oil prices will impact the economies or political stability of oil-producing nations, such as Russia and Iran. The conventional solution seems to be economic sanctions, but it has been said, "When goods stop flowing across borders, armies soon follow." At least North Korea is out of the headlines.

International anxiety may be good for gold prices as gold continues to have a place as a store of value in uncertain times.

TGR: What are your metals prices forecasts for 2015? [Read more...]

Article source: http://feedproxy.google.com/~r/theaureport/Ajgh/~3/JoZ5ES54I1I/16533

Avoid Dodos and Find Gold and Silver Miners that Can Soar

The Gold Report: A recent Raymond James research report refers to silver as the "devil's metal" What is the story there?

Chris Thompson: Silver is much more volatile than gold. Typically when we see a weak day for the gold price, silver has a terrible day. Likewise, if we see a strong day for gold, typically silver delivers exceptional performance. Because it's so volatile, we term it the devil's metal.

TGR: If the selloff in precious metal equities is over and this is the bottom, how long do you expect the flat-lining to persist?

CT: At Raymond James, in the near term we see gold trading rangebound between $1,200 per ounce ($1,200/oz) and $1,300/oz and silver trading rangebound between $16.50/oz and $18.50/oz. We are not seeing fundamentals that would prompt a price outside of those respective ranges. We expect current price strength to continue to the end of Q1/15, followed by some weakness into the summer and then more strength toward the end of the year.

TGR: In a recent research report you warned investors about 2015 possibly being the "Year of the Dodo" for certain precious metal producers. Please explain. [Read more...]

Article source: http://feedproxy.google.com/~r/theaureport/Ajgh/~3/Sm5tmlWjqLU/16516

Short Copper, Pray For Gold, Watch Ratio

Aibek Burabayev - INO.com Contributor - Metals


Dear INO.com Readers,

Today, I'm reviewing three metals based on short-term analysis.

Copper Is A Good Sell

Daily Copper Candlestick Chart

In my January post, I recommended selling copper above $2.75 and I hope you enjoyed a nice profit. For those of you who didn’t take that chance, below is my new one for you.

In December, copper entered a small steeper downtrend (highlighted in red) as the falling price accelerated. After breaking below the descending triangle’s base at $3.02 on the monthly charts, this red metal hit a multi-year low at $2.42, unseen from 2009, losing an impressive 20% in just 2 months. The price met the downside of the channel and quickly bounced off for a $0.20 gain and I will show why you should consider it a dead cat bounce. [Read more...]

Greece, Nazis And 3 Strong Sectors

It's hard for me to believe that the newly installed Greek government is now calling for Germany to make reparations of some $250 billion because of what the Nazis did 75 years ago to Greece. Such is the world we live in.

Make no mistake about it, Greece is the Achilles' heel of the euro and just this morning Alan Greenspan, former head of the U.S. Fed, came out and indicated that it was just a matter of time before Greece exits the euro. I couldn't agree more with him, Greece is just an accident waiting to happen.

Unlike the United States, which is one nation with one currency and laws, the euro has been cobbled together with a number of countries that have nothing in common with each other. They don't speak the language, they don't have the same customs and traditions, and they certainly don't share the same discipline for work. [Read more...]

Gold Update: Total Recast

Aibek Burabayev - INO.com Contributor - Metals


Dear INO.com readers,

Today Gold hit the $1300 level and I updated my chart for Gold, as it was price trigger for my previous bearish scenario.

In my first article last December I charted the line graph for Gold with a descending triangle pattern detected on this metal. My projection for the mentioned pattern was bearish with quite bold target levels.

What is up today?

The main rule for success is to not to be biased and always challenge yourself with making a brand new analysis from time to time, and surely when market is not going your way.

Today I prepared an absolutely new Gold graph to put fresh eye on it, now with candlesticks.

Gold Chart, small and big wedge chart patterns.

This time I detected a very interesting chart pattern called the “wedge.” This type of patterns is outstanding as it has an ambiguous impact on the market with either a continued or reversed outcome. Luckily, we have two wedges on the same time frame at once. Both are the falling wedge type because of the descending highs and lows. The big one is highlighted in green and the small is in black. Apart from it, we have two more rare technical species on the chart. [Read more...]

Is Market Sentiment Shifting to Gold?

The Gold Report: Quite a few analysts believe 2015 will be a year of great economic volatility, as foreshadowed by what happened with oil in 2014. Do you agree?

Eric Coffin: I do think 2015 will be pretty volatile, with the potential for nasty financial surprises. We've already seen bond yields go negative in Germany, France and elsewhere, and we could see big moves in and out of different asset classes.

TGR: Could the oil price collapse be a leading indicator of a global economic slowdown?

EC: That's an oversimplification. Economic growth in China has slowed and will probably slow some more. And China is the 800-pound gorilla of commodity consumption. Estimates for worldwide growth in 2015 have recently come down but not enough to justify the drop in the oil price.

"Excelsior Mining Corp.'s Gunnison project has extremely good logistics."

The main reason for the oil price crash is oversupply. U.S. supply has grown massively due to fracking and horizontal drilling, while Libya and Iran have both added a million barrels a day. These events have disrupted the equilibrium.

TGR: Mario Draghi, president of the European Central Bank (ECB), has famously boasted he will do "whatever it takes" to save the euro. Greece will hold an election Jan. 25, and the polls tell there is a good chance the new government will reject its current arrangement with the ECB. If this occurs, can the euro be saved? [Read more...]

Article source: http://feedproxy.google.com/~r/theaureport/Ajgh/~3/y1oj6yeDBq0/16464

How The Oscars May Affect The Way You Look At The Markets

This past weekend I saw a great movie titled, The Imitation Game starring Benedict Cumberbatch and Keira Knightley, both of whom are nominated for Academy Awards, as is the movie itself.

The Imitation Game chronicles the life of Alan Turing, who is largely credited with developing the computers we use today. The story revolves around the incredible work that was done at Bletchley Park in England to break the German Enigma code. At the time, the Enigma code and machine were thought to be unbreakable. The breaking of this code helped shorten and end the war. Otherwise, I would be writing this post in German and not English (I was born in England right after WW2).

If you haven't seen the movie, I highly recommend seeing it and witnessing the extraordinary genius of a remarkable man named Alan Turing.

Why would I discuss and recommend a movie when MarketClub and INO.com are financial websites dealing with stocks and futures? The reason I bring this up is because I wanted to share with you some math today that can help you in the market.

Now don't worry this is not high-level mathematics, it has more to do with a remarkable sequence of numbers known as the Fibonacci sequence. [Read more...]

The Next Bombshell To Hit The Markets ... Greece

The big news of this past week has to be the Swiss National Bank (SNB) parting ways with the euro. Make no mistake about it, this was a game changer and the ramifications of SNB's actions will be felt for a long time to come.

The next big game changer will be Greece exiting out of the Euro and going back to its old currency the Greek drachma. It may not happen next week, or next month, but it will happen.

On to the markets - it has been quite a week for the indices, with the DOW, S&P 500 and NASDAQ all down over 2%. The strong downtrend in crude oil was unabated, with crude closing down the week with a loss of 3%. The only two positives of the week, are the dollar index, which closed the week with a gain of 0.7% and gold which climbed to its best levels in over four months with a gain of 3.16% for the week. [Read more...]

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