You can see that Bonds/Gold has repeated the 3 largest rallies in the last 4 years in the recent rally from July. Gold has dropped and bonds have rallied since July, driving this ratio to the similar magnitude and time rallies.
Previous drops in the ratio from an advance like this one have been at least 60% (early 2012) to as much as 80% (into the fall of 2012).
This time may be different, of course, with the level of central bank buying of bonds around the world to drive rates to such low levels, that it makes the US Long Bond appear cheap with nearly 3% rates while 50% of the rest of the world is at rates less than 1%. However, there has been another force keeping bond prices up and that is "short covering" from financiers who were shorting bonds to buy other assets and currencies. When you get a blow-out decline in a large market, like crude oil for example, it often means that leveraged longs are getting out and "managing risk" (which is a nice way to say they are selling to stay alive).
I'm trying to make a prediction, but I'll just say that you can see a double-top in this ratio and the recent action is consolidating well off the recent highs. This means to me that the next move could be down for the ratio and by about 8%, so that gold will outperform bonds by 8% over the course of 1-2 months. That's how I see it.
Tim 1:06AM December 8, 2014
Previous drops in the ratio from an advance like this one have been at least 60% (early 2012) to as much as 80% (into the fall of 2012).
This time may be different, of course, with the level of central bank buying of bonds around the world to drive rates to such low levels, that it makes the US Long Bond appear cheap with nearly 3% rates while 50% of the rest of the world is at rates less than 1%. However, there has been another force keeping bond prices up and that is "short covering" from financiers who were shorting bonds to buy other assets and currencies. When you get a blow-out decline in a large market, like crude oil for example, it often means that leveraged longs are getting out and "managing risk" (which is a nice way to say they are selling to stay alive).
I'm trying to make a prediction, but I'll just say that you can see a double-top in this ratio and the recent action is consolidating well off the recent highs. This means to me that the next move could be down for the ratio and by about 8%, so that gold will outperform bonds by 8% over the course of 1-2 months. That's how I see it.
Tim 1:06AM December 8, 2014
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