With continued turmoil in global markets, today King World News is pleased to share three fantastic long-term gold charts along with an extraordinary commentary from one of the legends in the business, Louise Yamada. These long-term charts will help KWN readers take a step back from the day-to-day action in gold in order to take a look at the big picture.
By Louise Yamada, Founder of Louise Yamada Technical Research Advisors
January 8 (King World News) – Gold Spot price (GOLDS-1,188.48, see Figure 9) has been struggling below the 2005 uptrend and below the declining 10- and 20-month MAs with negative monthly momentum still in place. The risk remains for further attrition toward 1,000. Rallies would find resistance at 1,240 and 1,260 near the declining 200-day MA.
Gold and Stocks
The DJIA versus Gold ratio (rising line depicts equities outperforming; falling line depicts Gold outperforming) shows that equities outperform gold during structural equity bull markets and Gold outperforms equities during structural equity bear markets. Said another way, Gold seems to experience its structural bull markets as equities experience their structural bear markets and vice versa.
The peaks in the ratio (see Figure 10, top arrows) all define the end of structural equity bull markets and the beginning of new Gold bull markets. The ratio reversals at the bottom (see lower arrows) represent the end of Gold structural bull markets and the beginning of equity structural bull markets.
One can note that the ratio lifted in favor of equities in 2013. Given the four-year base in the ratio, the broken 11-year downtrend, and the 2013 ratio breakout from the base, one has to acknowledge that stocks are outperforming Gold in a new structural equity bull cycle…(see chart below).
Gold and Interest Rates
Additionally, Gold bull markets appear to end with, or shortly after, structural interest rate cycles come to an end (noted herein, August 2013). But we have only one prior cycle for comparison, in 1980-1981.
From an interest rate perspective (see Figure 11), the bull market in Gold in the 1970s accompanied a period of inflation (and rising interest rates, left arrow) during a structural equity bear market (1966-82), ending before the liftoff into the new structural equity bull market (1982-2000). The recent 2002-2011 Gold bull market accompanied a period of deflationary fears (falling interest rates, right arrow); or fears of Fed-induced inflation from printing money.
In the last cycle the Gold bull market ended just prior to the reversal from a structural rising interest rate cycle in 1981 into a structural falling interest rate cycle…(see chart below)
This was a small portion of Yamada's 50 page report. To subscribe to Louise Yamada Technical Research Advisors CLICK HERE.
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