The ratio of Gold vs. TLT, after breaking out of a 2.5 year base and digesting its gains, is breaking out of a new 6 month base. Gold is being used over treasury bonds as a risk off hedge. Rising inflation expectations seem to be kicking in into asset preferences. $GC $ZB $TLT pic.twitter.com/ARbHX1j6HV
— Rafael Marulanda (@rafatrade93) January 4, 2021
Today’s Chart of the Day was shared on Rafa Marulanda (@rafatrade93). It’s a ratio chart of Gold vs. US Treasury Bonds ($GC/$TLT). Ratio charts are great because they help to simplify opportunity cost for investors. As a reminder, when the line is rising it means Gold is outperforming Treasuries and vice versa. Both of these assets are perceived as safe-havens. But as Rafa points out, Gold looks like the more attractive safe haven at the moment. As you can see, this ratio is breaking out of a multi-year base in favor of Gold. You already know what they say about big bases – “the bigger the base, the higher in space.” Also, January has historically been the best month of the year for Gold. In a comment to The Chart Report Rafa said, “You have to listen to the market, and right now, the market is making a clear statement. Gold is the better bet here as far as safe-haven assets go.”