Uranium’s Bearish Message for Gold
June 25, 2016
With the Brexit vote now decided, a lot of attention has turned to gold as a supposed “safety” asset. Most traders who lived through the big decline of 1980s do not think of gold as a “safe” asset. And the message of this week’s chart is that expectations for a big gold price rally from here may be misplaced.
A year ago, I wrote here about the role of uranium prices as a leading indication for what gold prices will do later. A 7-month lead time seems to be ideal for getting the best fit between the two plots.
The recent rise (since late 2015) in gold prices is a bit of a delayed reaction to the rise in uranium prices. But looking ahead from now, we can see that the recent drop in uranium prices is foretelling a drop in gold prices over about the next 6 months.
Gold can sometimes ignore uranium’s message, as we saw in 2009-2010 when gold trended higher in spite of uranium having trended downward. That was an adjustment process following uranium’s big spike up move in 2007, and uranium’s 2008-10 downtrend was a process of unwinding those excesses. So yes, there are exceptions to this model working perfectly.
Right now, we do not appear to have a bubble in uranium prices to suggest that something is amiss in the model. So I am expecting that gold should be able to stay with the program, and head downward into late 2016. Such a move would also fit well with the expectation from the 8-year cycle in gold prices.Subscribe to NFTRH Premium for your 50-70 page weekly report (don't worry, lots of graphical content!), interim updates and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com and Biiwii.com. Also, you can follow via Twitter @BiiwiiNFTRH, StockTwits, RSS or sign up to receive posts directly by email (right sidebar).