Status on the Dow-Gold Ratio

Gold has been doing miserably on negative news in Europe. As a result the Dow/Gold ratio has been going up since Europe has been implementing LTRO I and LTRO II late 2011. I believe we will have support now at Dow/Gold ratio of 9 and it could be time to sell the Dow and buy gold (Chart 1).

In this article I go deeper into the "China play" on this gold dip.

Chart 1: Dow Gold Ratio Short Term

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Copper turns to backwardation, prices poised to rise

I have been monitoring the copper warehouse stock levels in previous articles and today I came across an interesting article on Seekingalpha talking about copper futures contango. In that article the author gave a historical chart of the premium or discount for contracts extending about a year to 18 months in the future.

We will see that backwardation will have a positive effect on copper prices and much more. The Chinese have been doing very odd things with their copper warehouse stocks.

To read about this go to: Copper turns to backwardation.

Chart 1 and 2: Copper futures contango and copper price

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Rising U.S. Trade Deficit for March 2012

The U.S. trade deficit has widened to $US 50 billion in March 2012. The trendline since 2009 up till now has been pointing to widening trade deficits (Chart 1).

Imports were probably higher due to more expensive oil imports, while exports have slumped (Chart 2).

Chart 1: U.S. Balance of Trade

Chart 2: U.S. exports

Incidentally, the U.S. dollar cash index is again pointing down just recently (Chart 3), despite problems in Europe. The dollar index spot (DXY) is currently at 79.5. If this index continues to fall, I predict that imports will go up even more in the future as the U.S. dollar loses purchasing power. Accompanied by the devaluation of the U.S. dollar, will be an ever more rising trade deficit.

Chart 3: Dollar Cash Index

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The "Hollande" Effect

Investors are speculating on what will happen when François Hollande wins the French elections this Sunday 06 May 2012. Many things can occur, please go here to read about the consequences.

Election results

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Significance of Rhodium Prices on the automotive industry

Rhodium is a metal in the platinum group metals group (PGM) that nobody really knows about in the investor world. It isn't traded online through futures, while gold, silver and platinum does. You can only buy this metal physically through dealers which makes this metal perfectly unmanipulated. So I am very keen on using rhodium prices to find correlations in the macro-economic world as they are a very reliable indicator.

Rhodium prices are extremely inelastic, which means that its price is very dependant on supply and demand. If there is no supply and a lot of demand for rhodium, the price will skyrocket. The rhodium market is very small compared to the gold market and will have high volatility and low liquidity. For example, prices in 2003 were below $US 1000/ounce, but went up to $US 10000/ounce, which is a ten fold increase (Chart 1).

Chart 1: Historical Rhodium Price

To read more about this trend correlation, visit: Significance of Rhodium Prices on the automotive industry.

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China about to start trading in gold and silver futures

In one of my previous articles about silver, I told an anecdote about how it was impossible to buy silver in China and Hong Kong. There was little to no incentive from the Asian public to even look at silver.

Little by little, a trend change is emerging. China approved silver trading on the Shanghai Futures Exchange on 26th April 2012. This will increase the liquidity in the silver market in China and is a first step into combating the manipulation of silver. The trading of silver futures will start on 10 May 2012. Additionally, PAGE is starting to trade in June 2012.

To read my analysis go to: China Initiates Gold and Silver Futures Trading.

For more background info go to this article: http://samcheekong.blogspot.com/2012/02/page-which-stands-for-pan-asian-gold.html

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Time to go long turbo gold/silver

I see positive signals everywhere on many blog sites about the price of gold moving higher.

First, the technicals are suggesting a surge in gold prices to above the $US 2000/ounce level. On Chart 1 we can see that a bounce could occur of the 50 day moving average above the 200 day moving average.

Chart 1: Gold Price

Second, Citibank analysts are suggesting price goals of $US 2400/ounce (Chart 2). Indicating that we are at the bottom of the upwards channel. Time to go turbo long gold.

Chart 2: Gold Price (Citibank Analys)

Third, I read an article about Mish Shedlock going into silver. You only go into silver if you're absolutely sure the gold price is moving upwards. If Mish goes into silver, he's betting on gold going up and thereby leveraging his bet with the silver price.

Chart 3: PHYS gold premium V.S. gold price

Fourth, we see that gold premiums are at an all time low for physical gold (PHYS) (Chart 3). Sentiment is very bearish (1.18% premium) and should indicate a bottom.

Last but not least, we saw gold being slammed down yesterday, but it moved back up later in the day (Chart 4). Bull markets always have sharp declines and gradual increases. This is also a bullish signal.

Chart 4: Gold slammed down and moves back up

And by the way:

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