The document discusses trends in gold and the US stock market over the past 30 years and analyzes whether gold is a good investment in the current economy. It finds that gold generally rallies when the stock market and economy are down, performing best when the US stock market corrects 15-20%. However, with the US stock market currently only 3-4% below recent highs, the document concludes gold may not be a wise investment at this time, though it could trend sideways or see limited upside if predictions are wrong.

1. Gold

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Agenda
US Stock Market
Bull Trend (Higher highs and lower highs)
Investor Psychology/Sentiment
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2
3
4
Trend Lines

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 Do you think gold is a good investment
in current economy?

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Gold and US Stock Market 30 Year Charts
 What do the charts tell us ..

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In the period of 20 years from 1981 to 2000, gold moved
downwards or sideways constantly. Its rally started from the year
2001 starting at around $300 to $1900 in the year 2011.

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US stock market was trending upwards in 1981-2000 and it started down
trending or moving sideways in 2001-2010 according to the the chart.
It shows that when stock market and economy is down, gold rallies,
implying US stock market is inversely proportional to the gold for the last
30 years.

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What we can derive from this relation is….
Stock Markets and Economy need to perform badly for Gold to
perform well.
As US Stock Markets are doing good lately and is currently around
3-4% below the high made few months back.
So for the Gold to have steady up move US Stock Markets need to
correct 15-20%.
In general Gold is considered as safety heaven in times of
turbulence in economy.
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2
3
4

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Trend Line (Explained with Example in Next
Slides)
 A line that is drawn over pivot highs or under pivot lows to
show the prevailing direction of price.
 Uptrend line: A positive slope formed by connecting two or
more low points. The second low must be higher than the first
for the line to have a positive slope.
 Downtrend line: A negative slope formed by connecting two
or more high points. The second high must be lower than the
first for the line to have a negative slope.

9. Funny!

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How to Draw a Trend Line ..
 You can see the step case with
numbering.
 If you join the starting points of first2
steps i.e. 0 and 2 and draw an
extended straight line. This straight
line is called Trend line.
 So Trend Lines can be used to
determine the period of Uptrend or
Downtrend.
 When this trend line breaks it is
normally followed by a big up move in
opposite direction.

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Trend Line Example

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Trend lines suggest that when the market index moving in a certain
direction breaks the trend line, the big price movement in opposite
direction occurs.
This figure shows the Sensex index trending upwards from 2005 to 2008.
The trend line is drawn by joining the lowest points of the market index.
The index broke the trend line first time in 2008 and big down trend
started in Sensex after few weeks.

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This figure shows the Sensex index trending downwards from 2008 to
mid 2009. The trend line is drawn by joining the highest points of the
market index down trend as shown above. The Index crossed the trend
line in mid 2009 and big up trend started in Sensex.

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Gold Trend Line

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Bull Trend
•Identified by a series of rallies where each rally exceeds the
highest point of the previous rally.
•Decline between rallies ends above the lowest point of the
previous decline.
•A series of successive higher highs and higher lows.

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According to this chart, Gold index is trending up from 2008 to end of
2011. At the step number 15, it can be seen that the lowest point of next
rally is ending below 15.
This may be suggesting the end of the bull trend and hence the
downtrend of gold will start soon.

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Investor Psychology
Gold has reached the market peak so everyone is very
confident about investing in gold.
This figure about the Investor Psychology/Sentiment in bear
market shows that top of the bubble is vulnerable to high
volatility.

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Conclusion
 Thus the trends strongly suggest that the gold would not be a wise
investment at this time.
 Although, it can not be concluded completely. So there are three
possibilities.
1. These predictions can be 80% correct, suggesting gold will start down
trending.
2. Gold will trend sideways remaining in constant range.
3. If these predictions go wrong, it will be good investment at the $1900 level.
There will be only 15% of less profit by entering the gold market at that range.
But certainty of the gold rally can be assured.

19. Joke Time!
 Financial News Channel host 1:We have inflation data today!
 Financial News Channel host 2:What you think markets are thinking?
 Financial News Channel host 1:If Inflation comes bad like more than 8%
then markets can fall in a big way and we should take this as big negative
for markets.
 Inflation comes out and it came at 9.5% much worse than what News
Channel Host expected but Markets went up 500 points after that…
 Financial News Channel host 1: Why do you think markets went up?
 Financial News Channel host 2: I think markets have become more
intelligent and markets think the future inflation will be better than this
figure.
 Grrrrrrrrr!

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