Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
A Lesson About Gold – How Bullish Can It Be? - 24th Jan 20
Stock Market January 2018 Repeats in 2020 – Yikes! - 24th Jan 20
Gold Report from the Two Besieged Cities - 24th Jan 20
Stock Market Elliott Waves Trend Forecast 2020 - Video - 24th Jan 20
AMD Multi-cores vs INTEL Turbo Cores - Best Gaming CPUs 2020 - 3900x, 3950x, 9900K, or 9900KS - 24th Jan 20
Choosing the Best Garage Floor Containment Mats - 23rd Jan 20
Understanding the Benefits of Cannabis Tea - 23rd Jan 20
The Next Catalyst for Gold - 23rd Jan 20
5 Cyber-security considerations for 2020 - 23rd Jan 20
Car insurance: what the latest modifications could mean for your premiums - 23rd Jan 20
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Intermarket Analysis Applied to Gold, Gold Stocks and Bonds

Commodities / Gold and Silver 2012 Jun 05, 2012 - 06:46 AM GMT

By: Jordan_Roy_Byrne

Commodities

Best Financial Markets Analysis ArticleLongtime readers know that we are a huge fan of intermarket analysis which is a rather new field within technical analysis. I believe John Murphy developed this field, thanks to his book. Intermarket analysis is the analysis of the relationships between the major asset classes: stocks, bonds and commodities. Furthermore, evaluating and comparing the different sectors within those asset classes also counts as intermarket analysis. Essentially, it is comparing one market to another. Intermarket analysis is essential when analyzing the precious metals complex because it is always affected by or has some relationship to other markets.


For example, strength in government bonds or strength in the US dollar is usually a headwind for gold. Likewise, strength in equities can be negative for gold as it shifts money from gold back into conventional investments. Today we are looking at US bonds and their effect on gold. Keep in mind the treasury market is the largest in the world. Upon that realization, one can easily understand why peaks and valleys in bonds have a substantial impact on precious metals.

In the chart below we plot TLT (Bonds), the HUI Gold Bugs Index (large miners) and gold. While bonds and gold have been the big winners since 2000, they remain uncorrelated on shorter time frames. In the chart we highlight four cases in which gold and gold stocks bottomed and bonds peaked shortly thereafter. Interestingly, bonds and gold were correllated in late 2007 to early 2008, in early 2010 and in the lead up to the Euro crisis in late 2011.


That being said, the largest advances in gold and gold shares have occurred when bonds were forming an important peak. There was a positive correlation in the summer and fall of 2011 but that reverted to negative three months ago. It is important to note that gold and gold stocks typically bottom ahead of a peak in bonds (and trough in interest rates). Thus, we will be looking for evidence of a peak in bonds to confirm the major low in precious metals.

Below we show the Market Vane bond survey (source: sentimentrader.com) which shows 77% bulls. Note that the major peaks in the bond market in 1998, 2003, and 2008 coincided with readings of 90% bulls.

A peak in bonds would certainly give a lift to gold because bonds, aside from being the largest asset class by far appear to be the only asset class holding gold back. In the chart below we plot gold against foreign currencies, equities, oil and commodities. Gold looks healthy against foreign currencies while it has bottomed against equities. Relative to commodities, Gold has made a new high.

In summation, the precious metals complex has put in a bottom and an ensuing peak in bonds would not only confirm the bottom but would add fuel to the rebound. That being said, we feel bonds have more room to move. TLT closed at 129. We have a technical target of 145.

That seems extreme but note that the percentage of bulls needs to rise another 13% before sentiment hits a true bullish extreme. As we noted, precious metals typically bottom one to two months before bonds peak. Thus, we could see some backing and filling in the complex until bonds peak. The start of a new cyclical bull market in gold and the gold stocks will not be confirmed until we see an important top in bonds. In the meantime, we continue to focus on the companies best positioned for and most likely to take advantage of the inevitable next leg up in this bull market in precious metals.

If you'd like professional guidance in this endeavour then we invite you to learn more about our premium service.

Good Luck!

Jordan Roy-Byrne, CMT
Trendsman@Trendsman.com
Subscription Service

Trendsman” is an affiliate member of the Market Technicians Association (MTA) and is enrolled in their CMT Program, which certifies professionals in the field of technical analysis. He will be taking the final exam in Spring 07. Trendsman focuses on technical analysis but analyzes fundamentals and investor psychology in tandem with the charts. He credits his success to an immense love of the markets and an insatiable thirst for knowledge and profits.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules