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This ratio continues to decline and shakeout the weak hands. There is nothing to really say here other than the pain is being felt by many for far too long and with recent developments of Kinross and the gold rice I think it is finally time for this indicator to begin its long arduous journey back up.
The DOW has outperformed gold the past two weeks so the ratio has risen. Eventually I am looking for this ratio to narrow to very near 1:1 meaning if the DOW is at 10,000, then so will gold be. As hard as it is to imagine it is becoming less difficult by the week with the recent wording by Hank Paulson regarding the takeover or bailout of Fannie Mae and Freddy Mac when he asked for an unlimited amount of dollar to be determined by him or the depth of the crisis. That type of talk is a precursor to what Zimbabwe is going through these days and it ain’t pretty.
Gold hasn’t come off as much as silver over the past few weeks’ percentage wise so gold has outperformed and made this ratio rise. While I do expect this ratio to fall and Silver to outperform gold in the longer term and trade in the teens it seems very comfortable ranging in the high40’s to the mid 50’s.
Oil came off quite a lot the past two weeks and this ratio gapped up as a result. While still off the historical norm of around 10:1 or so it’s good to see this trend change as oil has been rocking as of late and needed a breather. While I do expect to see continued strength in oil I expect gold to perform better and this ratio will rise if I am right. All the indicators are pointing up and it looks like a trending move up has begun but that will be confirmed over the next week or two as the moving averages turn back up.
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