Wednesday, September 7, 2011

Gold and Copper (from IKN122)

Here's a short'n'sweet commentary on the relationship between gold and copper that was part of the intro to IKN122, out last Sunday Sept 4th:

Gold and copper
Two for the price of one this week, as your author’s most worried-about metals are thrown onto a ratio chart and examined. Q&A time:
This time it’s different? Frankly I don’t think so and expect the recent bump in the gold/copper ratio to come back down towards the averages again (see below).
So gold down or copper up? I’d suspect a bit of both in fact, with gold levelling off to at or around U$1800/oz (that would be a very but very healthy result for our gold exposed positions of course) and copper rising again towards $4.50. Those two rough targets also make the math easy and give us a 400 ratio, right where the blue 50dma sits today.
Sounds like you’re less worried about copper this week? Yep that’s true. Despite the end-week weakness the U$4.12/lb close of Friday looks fine by me. If you like, compared to the commentaries over the previous two editions of the weekly I’d now say we’re halfway out the woods here, though still not fully out.

And here's the updated gold/copper ratio chart with a comment on today's action, Sept 7th:

Also, note that gold dropped to $1800/oz on its selloff today...and that the gold juniors took the adjustment largely in their stride. DYODD, but let's say it clear; fwiw* your humble scribe likes the look of the junior copper sector now.

*not a lot