Gold:Ratio Charts Offer The Keys To The Bull

I would like to update some ratio combo charts which may give us a sense of the bigger picture. It is like putting the pieces of a puzzle together where the small pieces don’t look like much by themselves but when they’re all added together it paints a clear picture. These ratio combo charts are just a piece of the puzzle that may add some clarity to some of the individual sectors.

Let's start with the TIP:TLT ratio chart in black with the TLT in red, which I use for the inflation/deflation debate. Most investors have their own individual stocks they like to look at in trying to answer the age old question, are we in an inflationary or deflationary cycle? When the ratio in black is rising it shows signs of inflation and when it’s falling deflation becomes possible.

On the left-hand side of the chart, you can see how the ratio in black topped out while the TLT was bottoming in 2011. Also at the bottom of the chart, I have added the GDX and the CRB index with the 30-week ema which also topped out in 2011. Since the 2011 high the main trend has been down for the ratio chart in black which shows deflation. In July of 2016, both the ratio and the TLT topped out beginning a consolidation phase that would last for about 2 1/2 years with each forming a triangle consolidation pattern. In November of 2018, both broke out of their respective triangles signaling that we may see some deflation in our future. Again, at the bottom of the chart, you can see the CRB index along with the GDX are currently trading below their 30-week ema which is not the end of the world but short term negative. The bottom line is that as long as the ratio in black keeps falling the odds favor a possible deflationary event maybe in the cards in the future.

This next ratio combo chart has the TLT:GLD ratio on top with GLD on the bottom. Remember correlations are never perfect but it is the general trend we want to focus in on.  When the ratio chart on top is rising it generally means GLD is falling. During the 2008 crash in GLD, the ratio was topping while GLD was bottoming. Then in 2011, GLD was topping while the ratio was bottoming as shown by the red arrows. From that point in 2011, the ratio has been rising while GLD has been declining.

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Disclosure: None.

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