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Thursday, November 03, 2011

Gold's Relationship to $SPX

With all the contradicting rumours recently regarding Europe, it may be worth watching the relationship of price action on Gold versus the S&P 500 Index ($SPX)...to see which one may be acting as actual bullish buying versus hedging on a potential bearish downturn.

Below are Daily charts of Dec/11 Gold and $SPX.

Gold has been quietly rising after finding support around 1600 and has broken above its last swing high...above are a couple of Fibonacci fan line resistance levels around 1775 and 1830, so it has room for further upside movement.

$SPX has run into a confluence of price and Fibonacci fan line resistance and, as I mentioned in last night's post, may be forming the right shoulder of a H&S pattern.

Below is a 20-day 30-minute percentage comparison chart of Dec/11 Gold and $SPX. Up until today, the $SPX has led the advance in percentage terms...but Gold is not far behind as of today's writing...I'll be watching for any sign of a cross-over in the next few days as traders potentially lose confidence in equities.

With all the temper tantrums being thrown in Europe, fund managers may find that Gold is the safest place to park their money for the next while...another relationship that I'll be watching over the next days/weeks to come.