Note the LONG TRENDS in Gold versus the S&P500 - From 1994 to 2000 the ratio declined just as dramatically (by 80%) into the 2001 low. But when the ratio turns it seems to move for a long time (7-11 years per trend).
The latest news about the Swiss National Bank (SNB) making a major policy change and making interest rates negative out to 7 years (and -0.75% for one year) means that investors may want to hold onto something a bit more stable than a currency. Time will tell if this is the bottom or not, but for now there is price momentum, news and logic (low/negative interest rates) to support a continued advance in gold.
Maybe look for a 20%-30% outperformance for gold over stocks in 2015-2018.
Comments
Kainat_Hashmi_KainatHashmi
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what is next level???
Bmack
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Love that you started using the Gann fans now! They are helpful, no?
IvanLabrie
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I think they are actually hand drawn speed lines, maybe related to Glenn Neely's EW?
(See the book credits, the man himself thanks Tim for his help!)
A-shot
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Im also in gold now, but i did not get why is it to be a long at this point, why now (according to the chart you posted and apart from 0.25 fib)
timwest
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Why now = Interest rates have gone from zero to -0.25 to -0.75 in Switzerland. There is a strong disincentive to not own cash and that money could flow into gold at the margin. Also, with the amount of credit being created (same old story here), at some point people will want to buy something real instead of something that can be infinitely created out of thin air (accounting gimmicks). It's like a game of musical chairs, when the music is playing and everyone is dancing around you forget that there aren't enough chairs (gold) to sit down in and then when the music stops (who knows when people will think to buy gold) everyone has to sit down (buy gold, in this analogy). Of course, no one "has to" do anything.
A-shot
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Ok, then i would definitely add this to the comment of the chart. I agree on the cash, and although i am partially in gold, part of my cash still looses to gold. Any advice on a breakdown that you think may be ok in the forthcoming situation apart from having partial exposure to gold? (and your favorite silver )
timwest
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Silver is definitely my favorite to gold. But gold is a much bigger market (30 times larger maybe?). What do you mean that your "cash loses to gold"?
A-shot
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I have my cash not in dollars only, sorry for the vageness