Weldon's Mini-Metal Monitor: The New Equity Reflation - 'Paper Gold'
The macro-investment message has been made clear in the early stage of 2006, as paper-gold is outperforming the broader paper equity market.
This is defined in our ratio chart on display below in which we plot the AMEX Gold Bug Index relative to the S+P 500. Technically, the HUI is breaking out against the S+P, and by so doing, is extending its long-term secular reversal to the upside.
Specifically, we note that the recent Gold correction held dead-on the uptrending long-term 5-year moving average applied to the Ratio and has since broken back above the mid-term downtrendline that defined the correction.
Further, we note the surge and upside breakout in the 52-week rate-of-change indicator along with the violation of, and then directional upside reversal in, the moving average applied to the ROC.
Of course, the macro-eco message emanating from the chart above is quite SOUR too, suggesting a return to the 2001-2002 U.S. consumption-contraction defined eco-environment, a thought-process that is in synch with the macro-themes detailed in our recent Money Monitor focus on U.S. money supply and credit.
This is a SECULAR TREND, favoring paper bullion, over your average paper equity investment, a trend that has only just begun, and a trend that marks the end of a 20+ year secular trend in the other direction.
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