Examining the Gold to Bonds Ratio

Gold priced in Bonds has been trending lower since topping in mid September. The ratio chart below using the ETF’s of Gold ($GLD) vs US Treasuries ($TLT) shows that downtrending channel. There are a few key areas coming up to watch for a potential change of character. First the bottom of the channel, currently at a ratio of 1.30. Next the 100 day Simple Moving Average (SMA) at 1.31. Third the 50% Fibonacci retracement at 1.31. Next the remainder of the gap between 1.33 and

1.30. you get the picture, the 1.30 level is important. A move below 1.30, breaking the channel would be very bearish with a target of 1.22 or another 6% lower. There is 61.8% Fibonacci at 1.28 along the way and another gap to 1.24 as possible support. But all indicators support further downside. It would take a move over 1.35 to change that thinking and over the top of the channel, currently at 1.39 to reverse it to a bullish bias. Until then more weakness for Golds in terms of Bonds.

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