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Sunday, June 19, 2005 2:06:30 PM
XAU/gold ratio, long term easily justifies a move up to .25
Say gold drops back to 430 ST and ratio steady improves to .25 we have XAU of 107 or 15% improvement potential with gold dropping $10, but an improvement in the sentiment/outlook of gold shares. Just a rough calculation to show that while gold does look toppy ST gold shares themselves are still cheap even with a $10 drop in gold. As such any ST correction should be shallow.
Euro/gold
Looking at the longer term chart it's much easier that the current action while encouraging is unlikely to be sustainable ST.
I think the EU news of late has given us a sneak peak of what will happen 1-2 years down the road when gold does start to rally globally again all currencies. I don't think we're there yet, but as always the depth of the pullback when it comes will give a much clearer picture. Those calling for sub $400 gold did so forecasting the Dollar moving higher and simply plotting the usual correlation. I myself thought that would also be the case. Given the correlation of late sub $400 seems less likely and new HUI lows more unlikely. Although I still favor one more period of weakness starting anywhere from 1-4 weeks from now and lasting till late July to late Aug. This is mostly for NA issues, I expect that SA issues will continue appreciate regardless as they are starting for an even better valuation standpoint and the Rand looks to have topped IT.
Say gold drops back to 430 ST and ratio steady improves to .25 we have XAU of 107 or 15% improvement potential with gold dropping $10, but an improvement in the sentiment/outlook of gold shares. Just a rough calculation to show that while gold does look toppy ST gold shares themselves are still cheap even with a $10 drop in gold. As such any ST correction should be shallow.
Euro/gold
Looking at the longer term chart it's much easier that the current action while encouraging is unlikely to be sustainable ST.
I think the EU news of late has given us a sneak peak of what will happen 1-2 years down the road when gold does start to rally globally again all currencies. I don't think we're there yet, but as always the depth of the pullback when it comes will give a much clearer picture. Those calling for sub $400 gold did so forecasting the Dollar moving higher and simply plotting the usual correlation. I myself thought that would also be the case. Given the correlation of late sub $400 seems less likely and new HUI lows more unlikely. Although I still favor one more period of weakness starting anywhere from 1-4 weeks from now and lasting till late July to late Aug. This is mostly for NA issues, I expect that SA issues will continue appreciate regardless as they are starting for an even better valuation standpoint and the Rand looks to have topped IT.
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