Here Is the First Clue When Gold Will Turn Higher Again

As we all know, gold and silver have been viewed as a form of currency since the beginning of time. Ancient civilizations used gold, silver and other metals as currency because they did not want a government to simply print an endless amount of paper money. Many people in modern times think that the ancients just didn’t realize paper money was easier to use, but that is not true at all. The ancients were very smart and understood mathematics better than any other subject.

Many people in the financial media are now very bearish on gold, silver, and other precious metals. After all, gold topped out in September 2011 at 1923.70 an ounce. At that point in time, J.P. Morgan Chase & Co (NYSE:JPM) upgraded gold to $2500.00 an ounce. Unfortunately for gold, the following week after the upgrade gold began to decline and has been selling off ever since that call by the giant financial firm.

So when will gold start to rally again? Well, it seems that gold has been declining as the U.S. Dollar Index has strengthened and the Japanese Yen has fallen. This tells us that traders should watch for gold to rally when the USD/JPY (US Dollar vs Japanese yen currency pair) starts to fall. According to the Commitment of Traders Report, over the past six months the commercial money has been increasing their net long position in the Japanese Yen. This tells us that they are betting that the USD/JPY will eventually fall.

Please take a look at the chart posted below and you can easily see how the SPDR Gold Shares (NYSEARCA:GLD) are trading inversely to the USD/JPY. Please note that the GLD is the thick black line and the USD/JPY is the green and red candlestick bars. Should this chart correlation remain intact it is indicating that when the USD/JPY declines gold will start to trade sharply higher. Everyone is now watching the efforts that the Bank of Japan is using to try and devalue their currency. Unfortunately for the Japanese, their economy is still struggling and their debt is mounting. The goal by the Bank of Japan is to try and create inflation and stop deflation, but once and if inflation ever starts it should only help to boost gold. This is the first clue when gold will start to turn sharply higher again.





Nick Santiago
Chief Market Strategist
www.InTheMoneyStocks.com