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Saturday, February 2, 2013

Timing Gold Across Currencies

As Pierrafeu suggests, the majority of money flow analysis on Insights flows from a USD perspective.

For example, when the invisible hand accumulates gold (as its doing now), it'ss usually captured by a rising diffusion index (DI) as the price declines (chart1)*.  This methodology aids timing for US centric investors.

Chart 1: Gold London P.M Fixed and Gold Diffusion Index (DI)

 * A rising DI suggests accumulation by the invisible hand.  Gold's DI has risen to 35.  This is already a higher reading than that of the 2009 B-wave bottom.

Investors buying gold in Euro, Yen, or Australian dollar terms, however, often realize timing discrepancies due to currency effects. European investors, like CIGA Pierrafeu, may be sensing another buying opportunity for Euro gold approaching. Minor adjustments to the US centric methodology (above) reveals a bullish setup and confirms this expectation (chart 2).

Chart 2: Euro Gold London P.M Fixed and Euro Gold Diffusion Index (DI)

Dear Eric,

We have been following Insights for some time now, and we believe we now understand the meaning of your teachings : One has to accept to bow and listen to the whispers of the Invisible Hand, as there indeed is a disciplined way for one to follow the message of this Invisible Hand.

We have a question for you, regarding the grounds you use for the analysis you offer to the followers of Insights : Most, if not all, of your analysis is based on USD numbers and data (GLD, London PM fixes...)

Is it correct to assume your (to be personally questioned and validated) analysis is also intended to bear meaning in the context of EUR analysis of Gold markets and flows ? It seems most, if not all of your reasonings are based on USD data - in the context of the Gold analysis you propose (and for which we are so grateful for), we are wondering whether there is a message as true in EUR terms as the one you have proposed in USD terms. Indeed we are perfectly aware of what Jim said when interviewed by James Turk in August 2011 : ""the trading that will take place between the Euro and the Dollar are purely mirror images reflecting what the flavour of the day is".

That "flavour of the day" seems to be a bullish EUR market in USD terms, affecting the EUR Gold market.

It would help a lot in our Physical action in this War if you could hint us as to the (flow) validity of your Gold analysis in EUR terms for "short term" triggers and "fishing hooks", as an addition to the USD analysis of Gold dynamics you have so generously offered to us. Keep it up Eric - explain and we will (question and) follow.

Have a great weekend, CIGA Pierrafeu ("Flintstones" in French)


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