Tuesday, June 21, 2011


The gold:oil ratio is nearing the upper limits of its trading band. When this level has been reached in the past it usually signaled a decline in gold (move down into an intermediate cycle low) and a rally in oil was eminent.

Normally I would expect the same this time as gold is very deep into an intermediate cycle and overdue for a major corrective move. There is a problem though. Oil is still very early in its intermediate cycle. Also oil has broken below its prior intermediate cycle low signaling a failed and left translated intermediate cycle is in progress.

Taking into consideration a normal intermediate oil cycle lasts 50 to 70 days, and this cycle is only on day 32, then oil should generally continue lower for another 20+ days.

As oil and stocks have been moving in lockstep lately it's not surprising that the stock market's daily cycle also has 20 or so days before an expected final intermediate bottom.

So if the gold:oil ratio is to regress back to the mean, and oil still has a month before an expected bottom the only way the gold oil ratio can decline is if gold starts to accelerate to the downside, dropping significantly faster than oil.


  1. The BEAR HUNT has begun with 90% vol and 90% stocks up yesterday....first the daddy bears till after july 4th and then bulls reload as indexes and gold pullback into july 29th Major Bradley Turn date and then the Bear Extinction phase starts (mamma and baby bears) into Dec. 28th, 2011 (next Major Bradley turn date) and then we pullback early next year and then off the higher highs...


  2. Gary, how would a potential collapse of the Euro (due to Greece) affect the gold/oil scenario you have outlined esp. as it pertains to their respective cycles i.e. do you think gold and oil would rise as 'safe havens' along with the dollar if Euro drops precipitously? thanks.

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  4. Cycles are independent of fundamentals. They are regression to the mean profit-taking events. If an intermediate cycle decline is due and Greece defaults, or the euro collapses, then that will be used to explain why gold dropped.

    What I'm trying to say is that the cycle decline will come no matter what. The media will use whatever is handy at the time to explain why it occurred. It will of course be nonsense. The true reason is that it was just time for gold to undergo a regression to the mean event.

  5. Gary,

    I understand what you are saying about cycles being independent events but there has to be exceptions. A 9/11 type event could occur during a time frame that an up cycle would be due but could instead send the markets further south for an extended amount of time.


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