Gold Surges Above "Key Pivot", Hits 3-Year High Against Yuan | Metals Mine

  • Gold Surges Above "Key Pivot", Hits 3-Year High Against Yuan

    From zerohedge.com

    Gold futures prices are up $45 in the last two trading days, bursting through the $1300 Maginot Line, and surging to the highest since March (in USDollars). Silver is also on a good run... But Gold's outperformance continues, with Gold/Silver ratio near 90.0x - the highest since 1993... Goldman earlier highlighted $1307 as a key pivot in gold. Their bias was for that level of resistance to hold but instead it broke and gold is up significantly the second consecutive day of large gains. "Getting through 1,307 would allow for a minimum next level target at 1,330. The broader implications of that break would ... (full story)

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swagtrading
Jun 3, 2019 10:06pm
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Interesting, because one thing which I have noticed over my years is that in a real gold bull-run, Gold would breakout in all the major currencies and that would give traders the most return. If Gold breakouts in just one currency, then it just shows that the currency is weak. However in all currencies, it shows Gold is is strong.

This article highlights that the breakout has happened in USD as well as Yuan. Note, China currently is the biggest gold consumer in the world and when locals see Gold rallying, one just starts to wonder when does FOMO takes over leading to additional gains.
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swagtrading
Jun 3, 2019 10:38pm
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Also, from a 12-months perspective, I think an excellent trade would be to Long Silver and Short Gold (equal $ value) as the Gold/Silver ratio is close to 90, highest since 1993. I would think its due to a fall towards 75. The ratio chart is in the article above

A rising ratio implies that Gold is outperforming silver. It also means Gold is more overbought than Silver. Typically in a Precious metals bull market, we see the ratio falling because Silver is a higher beta commodity and moves faster than Gold and gives stronger returns. We saw this in 2011, when the ratio hit close to 30 when Silver was close to $50. The word on the street was "Silver is the new Gold". However when the bear market stuck, Silver was smashed way more than Gold and became the laggard. Thereafter Gold has been outperforming Silver leading to highest gold-silver ratio since 1993.

If one thinks we are in precious metals bull market for some time then one would see Silver again coming back in fashion and thus a fall in Gold-Silver ratio.

Selling Gold and Buying Silver would be an excellent way to be market neutral but still having profit making opportunity!
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