Gold vs Stocks – A Traders Perspective

Gold vs Stocks – A Traders Perspective

The Goldbugs are happy. The masses seem to have finally taken the plunge headlong into the noble yellow buttery metal. Lets look at some charts, the first one taken from an article by mogambo guru in the daily reckoning website.

Looks pretty straightforward, Goldbugs say Dow is doomed to fall to a ratio of 1 ounce of Gold to buy the index.

I have no issues with the average joe being asked to own Gold, but to distort the picture by curve-fitting the chart is wrong. In the above cases the log scale distorts the perspective and changes the mean or average ratio from 12 to 8.

Lets look at the same charts without using a log scale.

Looks different doesn’t it. Now the same chart, flipped and rotated with an Elliot wave count added.

Bottom line is this. Stock are cheap again when valued in Gold. Time to buy.

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Jeevindra Kumar

charts from approximity.com