gold

Copyright © 2012 21G Investments. All rights reserved.

Do you think gold is a good investment in current economy?


Agenda

US Stock Market

Bull Trend (Higher highs and lower highs)

Investor Psychology/Sentiment

1

2

3

4

Trend Lines


1.Gold and US Stock Market 30 Year Charts

What do the charts tell us ..


In the period of 20 years from 1981 to 2000, gold moved downwards or sideways constantly. Its rally started from the year 2001 starting at around $300 to $1900 in the year 2011.


US stock market was trending upwards in 1981-2000 and it started down trending or moving sideways in 2001-2010 according to the the chart.It shows that when stock market and economy is down, gold rallies, implying US stock market is inversely proportional to the gold for the last 30 years.


We can derive from this relation that….

Stock Markets and Economy need to perform badly for Gold to perform well.

As US Stock Markets are doing good lately and is currently around 3-4% below the high made few months back.

So for the Gold to have steady up move US Stock Markets need to correct 15-20%.

In general Gold is considered as safety heaven in times of turbulence in economy.

1

2

3

4


Joke Time!

Financial News Channel host 1:We have inflation data today!

Financial News Channel host 2:What you think markets are thinking?

Financial News Channel host 1:If Inflation comes bad like more than 8% then markets can fall in a big way and we should take this as big negative for markets.

Inflation comes out and it came at 9.5% much worse than what News Channel Host expected but Markets went up 500 points after that…

Financial News Channel host 1: Why do you think markets went up?

Financial News Channel host 2: I think markets have become more intelligent and markets think the future inflation will be better than this figure.

Grrrrrrrrr!


2. Trend Line ..

You can see the step case with numbering.

If you join the starting points of first2 steps i.e. 0 and 2 and draw an extended straight line. This straight line is called Trend line.

So Trend Lines can be used to determine the period of Uptrend or Downtrend.

When this trend line breaks it is normally followed by a big up move in opposite direction.


Trend Line Example


Trend lines suggest that when the market index moving in a certain direction breaks the trend line, the big price movement in opposite direction occurs.This figure shows the Sensex index trending upwards from 2005 to 2008. The trend line is drawn by joining the lowest points of the market index. The index broke the trend line first time in 2008 and big down trend started in Sensex after few weeks.


This figure shows the Sensex index trending downwards from 2008 to mid 2009. The trend line is drawn by joining the highest points of the market index down trend as shown above. The Index crossed the trend line in mid 2009 and big up trend started in Sensex.


Gold Trend Line


In the Previous Chart the Trend Line of Gold is marginally broken when Gold price went below $1570.


Fun Slide


3. Bull Trend

A bull trend is identified by a series of rallies where each rally exceeds the highest point of the previous rally. The decline between rallies ends above the lowest point of the previous decline. A series of successive higher highs and higher lows.


According to this chart, Gold index is trending up from 2008 to end of 2011. After the step number 13, it can be seen that the next high made is ending below 13.This may be suggesting the end of the bull trend and the downtrend of gold will start soon.


Investor Psychology

Gold has reached the market peak. Everyone is very confident about investing in gold.This figure about the Investor Psychology/Sentiment in bear market shows that top of the bubble is vulnerable to high volatility.


Conclusion

Thus the trends are strongly suggesting that the gold would not be a wise investment at this time. Although, it can not be concluded completely. So there are three possibilities.

1. These predictions can be 80% correct, suggesting gold will start down trending.

2. Gold will trend sideways remaining in constant range.

3. If these predictions go wrong, it will be good investment at the $1900 level. There will be only 15% of less profit by entering the gold market at that range. But certainty of the gold rally can be assured.


For further assistance:Gaurav Verma21G Investmentshttp://www.facebook.com/pages/21G-Investments/353301421363897

Do You Have Any Questions?


Disclaimer:

The slides are for educational purpose only and these are my personal views which can be right or wrong. I am not responsible for any trading decision or any profit or Loss made with the help of this information.

gold

Economy & Finance