Here below an interesting and useful chart.

Gold continues to be the best performing asset in the market as she has been for a long period now. She breaks out when the dollar gains and when the dollar is debased. She breaks out when equity rises and when equity falls. She is for filling her age old function as a preserver of purchasing power, a store of value. As we can see from the chart gold has out performed the gold miners, significantly of late.

In the last few weeks gold miners have started a significant divergence from the equity indexes. This move has lead to a breakout for the unhedged gold miners of a long range bound period for them. A price breakout occurring at a time of wider equity weakness is very positive. This is significant and hints at a strong period for the gold miners that could well play catch up and out perform gold in the coming quarters, especially if gold strength continues alongside equity rebounds.

The ‘perfect’ scenario is significant monetary lose conditions ie qe3 plus across several currencies. This would be supportive of gold as well as equities. The result could be the long awaited ‘rush’ to the gold miners and start of their beta move vs gold. Certainly the cheapest way to secure gold is via the miners ie in terms of gold in the ground measures, etc.  Finally, you can also see the red line of the dow jones index on this chart. This is a very sorry looking index i must say. Relatively purchasing power continues to decline for those with no or minimal precious metal exposure. Negative yields continue as does the money printing. Cash (inc chfs), bonds, equities and most commodities seem to offer little by the way of purchasing power maintenance.

Is it any wonder Soros referred to gold as being the ‘ultimate bubble’.. This will be something to witness indeed. A history and a lesson to tell our grandchildren of. For disclosure, I hold gold and silver mining equities, option calls on the equities, futures on the gold and silver, physical etfs and finally, the physical it self which i hold outside of the euro area banking system.

Rich

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