In search of intrinsic value

Guido Romero Rank: 104 Followers: 3 Votes: 1 Years Member: 7 Last Update: 22 November 2014, 1:09 Categories: Relative Performance Charts
Gold / Gold Stocks
Currencies

Nov 17/14 - Interesting moves in the currency and currency vs gold market. If I interpret these charts correctly, it appears funds are moving out of Euros into Swiss Francs and gold. Charts 427 and 450 indicate something is going on.

Nov 15/14 - Things are still looking constructive for the metals. Certainly from the policy perspective our economies are still being shredded and hollowed and currencies trashed. Of course if you got into this trade around 2009/2010 you may not be impressed with the returns, but despite the recent pain, gold and silver are still sensible investments for at least a portion of your portfolio just as insurance. Make no mistake. Global central banks are not going to admit to what they have wrought. When the eventual denouement comes, you won't look so silly having some gold coins or bullion at hand outside the banking system. The evidence is everywhere that the denouement is at hand. Sovereign currencies are still in positive divergence. If this set up comes off as it appears, the US$ will retrace some of the gains thus facilitating a bounce in the metals. But the US$ has overcome some strong resistance presaging medium term gains to come within the following 12 to 15 months.

Nov 3/14 - We are in ugly territory. All supports have given way. The 50% Fib retracement since the beginning of the run is in play around 1100. If we get a bounce in the next few days, it may be advisable to lighten up or even divest of recent acquisitions particularly in the shares. Monetary policy has not changed of course and, in fact, we are fostering a much bigger monetary problem down the road. For the time being however and until some trends change, it may not be time to be fully invested in gold or gold shares. I am of course keeping a core position in bullion and adding in tiny increments as the price drops. Incidentally, the shares of Canadian Central Fund (CEF) are selling at a hefty discount to net asset value which providers a bit of a cushion for further price declines. But as far as

Less

100 - $SPX since 1980

The S&P is the benchmark I use to illustrate and buttress my argument.

101 - US$ purchasing power versus CPI

105 - 30years US Treasury Bond since 1980

110 - $SPX, the 30yr US TBond and the US Dollar since 1980

120 - $SPX and gold since 1980

125 - Gold since 1980

126 - Gold bullion inflated by the purchasing power of the US$

130 - $SPX valued in terms of gold bullion

135 - The 30yr US Treasury Bond valued in terms of gold bullion

140 - $SPX valued in terms of $XAU the gold mining company share index

Oct 7/13 - This is the power of the Fed. By simultaneously giving trillions to the banks and keeping interest rates artificially low, it can induce corporate re-financing thus boosting the nominal value of the stock market. The direct ramification of this policy is the devastation of purchasing power thus abetting inequality.

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