The gold price remains in a solid uptrend off its late 2008 low of
$700 oz. It is moderately overbought against the 40 wk m/a, but
is capable of a larger premium based on past experience. As the
chart shows, it is getting overbought on weekly RSI and MACD,
although trends of these measures are positive. $GOLD. I would
also suggest that at $1256, the gold price is getting extended on
the 5 year chart as well.
For the fun of it, I developed a little "Frothometer" for gold, and
it currently indicates a moderate level of froth and, it suggests that
matters get bubbly above $1300 oz. in the near term.
My gold macro-directional indicator had trended up reasonably
consistently since the latter part of 2008, but the advance did
break off at the end of 04/10, primarily reflecting weakness in
the industrial commodities and oil price parts of the indicator.
These components are stabilizing in the short run, but the gold
price has diverged positively from the full indicator to the tune
of about $60 oz. That represents a significant but not unprecedented
There is growing near term price risk in gold, but the risk is not
yet at "screamer" levels. Folks interested in gold should take note.
I have linked to a chart (below) which shows the relative strength
of gold compared to the platinum price in recent years. Notice how
gold has started to outperform platinum in recent weeks. This
may suggest that interest in gold is presently more a consequence
of investor concern about global financial / economic stability.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!