Gold May Be Cheap….

In Euro terms. Turmoil abounds in Europe. First Greece, then Spain, Italy and Portugal. Oh wait, Cyprus in between. Cyprus? When will it end? Seems like an environment where fear should prevail. With the euro in doubt, safety assets should be cleaning up. Treasuries are and the US Dollar is rising. Yet Gold in euro terms is floundering? What is up with that? The ratio chart below shows the SPDR Gold Trust Shares, $GLD, against the Currency Shares Euro Trust, $FXE trading in a tightening symmetrical triangle that was about 0.20 wide to start and is now down to 0.12 or about 40% through the consolidation. This is still short of the 60% power zone of the triangle where

a break out tends to be the most powerful. That would come in another 4 months, just before our elections. But the Greeks are about to hold elections this weekend. A catalyst? At the moment the ratio is firmly in the middle. This fits with the 2 mixed theses of the many. One that as the situation in Europe resolves the euro will be stronger. The other that the resolution will lead to a further fall of the euro. It is worth keeping an eye on for a potential break as the weekend approaches. The long term trend for Gold is higher while that for the euro is lower, leading to a bias to an upside break but not a guarantee. But beware that both are moving countertrend now as well. No trade until it breaks, no matter what you think the macro picture requires.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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