Make Believe Economy

Seems like gold has probably bottomed relative to commodities

But, based on horizontal count, P&F chart shows significant downside potential for the ratio

Until you look at the same P&F in a logarithmic format, which shows a much different picture - i.e. no breakdown

From where I am sitting, the differences in these two charts flows from trading related activities. It defies the imagination that gold could "collapse" relative to commodities, and so this begs the question: Why has gold been underperforming? We probably don't have to look further than the Central Bankers to find the answer.

Note the (exhaustion?) gap on the weekly chart below, and also note the deeply oversold RSI. (Although the MACD still has some downside potential)

What does all this mean?

Freddie Mac "bounced" at the same time

As did Fannie Mae

But the US Dollar is not looking happy

And the yields remain soft

And look what happened to the Dow! If transports hit a new high next week, we could have a full blown BUY signal!

And look at Real Estate

We appear to be witnessing a continuation of asset inflation. The Fed generated cash has to go somewhere; and it's going into commodities and equities - and bonds, and property. The gold price has been held back, and the dollar is still "OK", but very vulnerable

Adhesive tape, band aid and gum? Or structural improvement?

Bottom line: If you are employed to invest other people's money then, if you want to keep your job, you had better invest other people's money. The game is starting to become surreal.

What about gold? Will it remain under pressure?

Well, looking at the first few charts it looks like the rubber band was stretched too far in favour of commodities, and we can now expect a rebound in gold. This conclusion seems to be supported by today's breakout in the $XAU