Euro Versus Gold

The USD is in a bad shape and you do not need us to tell you so. The problem is to know what is the preferred way to save the purchase power of your capital in these times.

The two preferred assets that the public have chosen for this purpose are the EURO and GOLD. We decided to see what is really helping more to save the value of "money".

The attached chart is a daily chart of the currency pair EURUSD (Blue) and Gold (Maroon):

It is obvious from their price action, that they are both still very popular. Since the mid-2005, they are moving higher in an accelerating fashion. Every one has its own correction periods, but, since the start of this year they are both in a parabolic move seen rarely in such liquid assets.
In the lower window, you can see the EURO/Gold ratio and it is going down. After a period of consolidation (converging triangle), it has broken down with a target that is the depth of the consolidation pattern (1 violet).
As, you can see, the target is now achieved. The ratio is sitting also on one of the parallels inside the descending channel, which can be a very nice place for a rebound or reversal.

Conclusion:

The two assets for protection against the US Dollar collapse have gone vertical. Nevertheless, Gold was a better protection than the EURO currency until now. The ratio has arrived now at some technical analysis point where it could reverse.

Such a reversal does not say that these assets will continue to rise or fall but only that the EURO will become stronger in comparison to Gold. In case of a correction in these assets, it is logical that the metal should underperform on their way down.

Disclaimer

By no means do any part of this article recommends, advocates or urges the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author and his company express personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this article. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. The content of this article was created with the best known data at the time. The writer and his company are not responsible for the accuracy or completeness of the mentioned data. The writer is not a registered consultant of any kind and so the reader should not see any single part or the whole analysis as an advice for any kind of action in the financial markets.
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About the Author

Moshe Shalom
Head of Technical Analysis Department
ForexManage Ltd
Site: www.forexmanage.com
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