Where to from here Abi? - - UP! 1. relative Gold chart - gold divided by its own 200 dma
The r-GOLD chart is gold divided by its own 200 dma. It has proven to be a reliable indicator in spotting major bottoms and tops for gold in the past 10 years. Recently the rGold chart bottomed out again and points towards new highs in 2013.
2. GOLD & Monthly closes since 1970
When experts claim gold to be in record high territories and therefore being in a bubble, they mostly refer to gold's long term chart (monthly closes). When looking at this chart one would easily believe that gold is a bubble indeed therefore an accident waiting to happen. It's recent high of $1925+ seems to be too far stretched from its long term average of $383. The problem however with this chart is that it is extremely distorted. The distortion arises from the fact that this chart doesn't take into account the loss of purchasing power of the dollar over time. Needless to say the purchase power of a 2011 dollar doesn't match the purchase power of a 1980 dollar. Yes, bull markets do end when approaching bubble territories, but we are far away from that. During previous 'real' highs more than 20% of all invested money was in gold and gold shares, today this percentage is still below 1%.
3. Gold & Historical Average measured against official government CPI statistics
In order to calculate 'real' highs for gold one has to adjust for inflation. When using government inflation statistics then we'll see that the 1980 peak of $850 equals $2500+ today. Since no secular bull market ever ended without making new 'real' highs gold's current bull still has a long way to go.
4. Gold & Historical Average measured against John Williams' shadow CPI statistics
In order to calculate 'real' highs for gold one has to adjust for inflation. When using shadowstats inflation statistics we'll see that the 1980 peak of $850 equals $9000+ today. The inflation statics published by John Williams at www.shadowstats.com present a more realistic picture of true US inflation numbers. As this chart clearly demonstrates gold is far away from making new 'real' highs.
5. Gold & HUI - Gold shares vs Gold
Gold shares move in tandem with the gold price. Historically gold shares tend to outperform gold to the upside but as of 2008 the gold hares have been lagging the price of gold tremendously. Such extremes as we're witnessing today won't persist for a long period of time, which will translate eventually into much higher share prices (mining shares).
6. Gold & DOW - Gold measured against the DJIA since 1930
The DOW/GOLD chart is a powerful tool in order to determine major turnarounds. It's simple, when the DOW/GOLD chart tops you buy gold, when the DOW/GOLD chart bottoms you buy equities. Once you've established your position you can ride the wave up or down for at least a decade. The DOW/GOLD chart flashed a 'buy' for gold again in the year 2000 and indeed 11 years later gold is almost up 450% from its lows.
If it were all that simple why don't we hear that much about this powerful tool?
Well, the thing is the DOW/GOLD ratio chart isn't a useful indicator in order to predict yearly price movements. Next year could very well clock higher readings than this year instead of expected lower readings thereby losing confidence as being a reliable indicator. Unfortunately that's the same analogy as denying that higher temperatures will arrive in summer based on a single day temperature drop in spring. The problem is that the DOW/GOLD cycle has a wave length that's so big that we humans have a hard time to figure out where to position ourselves into this cycle
Other charts include:
2 - Gold & Monthly Closes since 1970
3 - Gold & Historical Average measured against official government CPI statistics
4 - Gold & Historical Average measured against John Williams' shadow statistics
5 - Gold & HUI - Gold shares vs Gold
6 - Gold & DOW - Gold measured against the DJIA since 1930
7 - US Monetary Base M0 - Exploding Money supply
8 - US Public Debt -
9 - US Treasuries and Foreign Holders
10-Gold performance vs DOW over past decade
All charts can be viewed HERE
These charts & more can be viewed here
