Relative Gold:
The relative Gold Chart (rGold)
is gold divided by its own 200 dma. It has proven to be a reliable
indicator in spotting major bottoms for gold ever since the gold
bull market began in April 2001.
Since
the gold bull market began in April 2001 gold made two major tops in
which it exceeded its own 200 dma by more than 20%. (rGold value >
1.2). This happened in May 2006 and in March 2008.
On the
downside gold has made some major bottoms in which it dropped below
its own 200 dma by 5 - 10% (rGold value 0.90 - 0.95)
The rGold range of 0.90
- 0.95 has proven to be a reliable BUY indicator indeed over the
last 7 years
Gold VS HUI
Critics
argue that gold shares could move independently from gold and tend
to move along with the DOW, not gold.
This
chart however proves beyond any doubt that thesis to be incorrect.
inthe long run gold shares move in tandem with gold.
