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Intermarket Explanation for the Coming Gold Bubble

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In an intermarket sense, the trigger for the coming bubble in gold will be the shift of funds out of bonds and into gold and the like.

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As my firm travela to Toronto for the Cambridge House conference, we thought we'd share a few points from our upcoming presentation titled "The Setup for a Gold Bubble." There are many different ways we can analyze this. By that we mean fundamental triggers, historical ratios, valuations and potential money flows, etcetera can explain the setup for and why this bull market will become a bubble. Today, we focus on intermarket analysis, which is one of our favorite subsets of technical analysis.

For a bull market to become a bubble, it needs to attract excess money flows from other asset classes. In other words, during a bubble, money flows from various asset classes into a single one. Prior to the bubble the market must be an underowned asset class with room to absorb the massive flows. This chart, from Pierre Lassonde's recent presentation shows gold's share of global asset allocations. It currently is below 3%, which is extremely low in comparison to the 1980 figure of 14% and considering that the bull market is in its 13th year.


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No positions in stocks mentioned.

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