Chart Advisor: Is Gold Starting to Shine?

Articles From: Investopedia
Website: Investopedia

By J.C. Parets & All Star Charts

Monday, 1st August, 2022

1/ Real Yields Roll in Favor of Gold

2/ Driving the Averages Higher

3/ Transports Are Moving

4/ Bulls Need a Catch-Up Rally in Crypto

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1/ Real Yields Roll in Favor of Gold

There has been plenty of evidence suggesting a significant breakdown in one of the world’s most critical inflationary assets, gold. Miners, silver and platinum are weak, and the silver/gold ratio recently hit multi-year lows. 

These aren’t the type of data points that would support higher gold prices. Real yields are another piece of evidence we can add to that list. 

The chart below shows the U.S. 10-year real rate inverted and a chart of gold.

Source: All Star Charts, with data provided by Optuma

They look nearly identical. Gold futures tend to trend lower when real rates rise (moving lower on the chart). Despite reasons to break down, Gold has remained resilient.

And now, as many of the negative data points mentioned above begin to reverse, including real yields, a rally in gold could ensue. With four straight winning days, it’s possibly already underway.

2/ Driving the Averages Higher

For the major averages to find a bottom and start moving higher, it is imperative for the largest stocks that comprise these indexes to do the same. In this cap-weighted world, markets rely on the biggest players to score most of the points. 

This is a custom index of the four largest stocks in the United States by market capitalization: Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), and Amazon (AMZN).

Source: All Star Charts, with data provided by Optuma

As you can see, they have been scoring plenty of points lately as our index has rallied nearly 20% since mid-June. 

With earnings out of the way for these mega-cap growth conglomerates, can they keep moving higher? Or maybe the more important question is, will the rest of the market follow? We’ll know soon.

3/ Transports Are Moving

As the recent stock market rally continues, more and more areas are seeing previous support levels come into play. After completing a major top in early June, the Dow Jones Transportation Average (DJT) is hooking higher and repairing the damage. 

Source: All Star Charts, with data provided by Optuma

As you can see in the chart, last week’s move brought transports back above their old breakdown level. Seeing this economically-sensitive group reclaim these former lows is an encouraging signal for the broader market and risk assets in general.

4/ Bulls Need a Catch-Up Rally in Crypto

While Bitcoin has moved modestly off its lows, Ethereum has almost doubled in just two weeks’ time. 

The recent rally has brought prices right back to their breakdown level from earlier in the year at last summer’s lows. This is shown at the top of the chart.

Source: All Star Charts, with data provided by Optuma

Bitcoin, on the other hand, is still about 25% beneath its equivalent level, which is around $30,000. If this move in Ethereum is going to be sustained, Bitcoin would need to play catch up, and soon. 

Originally posted 1st August, 2022

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