Today, gold broke a nearly six year-long downward sloping trend line that goes back to its all-time high of $1921 in August of 2011. Gold has not managed to cross above this trend line, currently at around $1280, since then, although it has come close a number of times including as recently as last April.
Today’s breach of this trend line is likely significant; historically, breaking above a five year long downward sloping trend line has signalled major bull market moves in gold (30% or more) including 2001, 1993 and 1985.
One of the better indicators for gold is the ratio of the price of the U. S. 30 year Treasury bond to the U. S. Dollar Index. Gold rises and falls with this ratio because it encapsulates two important factors driving the gold price. When the dollar is falling while the bond is rising (and rates are falling), as we see currently, gold tends to rise. A strengthening dollar and rising yields – as we saw after the Trump election – generate a headwind for gold. Here is a one year chart of the daily ratio. The red line is the ratio and the black line is the gold price.
This post was published at GoldSeek on 7 June 2017.
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