The attention is on gold now that prices have made a weekly negative candle and has weekly RSI turn below 70. This presents technicians with a few challenges. First is to identify whether the reversal is for real. Second is to establish till where the reversal can last in terms of price objectives. Third is till when the reversal is going to last in terms of time (days or weeks).

There is another implicit challenge for technicians. There is a need for a comparative strategy for the gold bullish investors. Let us assume technicians are able to calculate a price objective and gold is set to fall 30% from current levels for nearly a quarter and this was enough for gold investors to exit gold for a while and these investors had a choice of all other investments. The investor would need a comparative strategy to compare his/her investment options to either reallocate the cash proceeds or remain in cash in a certain currency. What should he do? Sell gold and remain in dollars, Indian rupee, British Pound, Canadian Dollar, Chinese Yuan, Swiss Franc or any other local currency he (she) is using to invest in gold.

Investors don't just invest in gold, they also invest in a local currency (receivables and payables) along with the precious metals. But rarely is gold is seen accompanying a local currency. We did a primary multi month comparative ranking of gold with various global currencies and with Dow and Oil. The aim is to illustrate the polarized performance of gold against various global currencies etc.

According to the ranking gold should outperform Indian Rupee and Dollar. The precious metal should underperform British Pound and Swiss Franc. This means Indian Rupee and dollar should weaken against British Pound and Franc. This also means that gold held in British Pound and Franc should fall less than the gold held in Indian Rupee and Dollar. We have also illustrated Gold vs. Dow and Gold vs. USD Rieki. Both of the Rieki (performance cycles) suggest that if gold is falling Dow should fall more and in terms of dollars, gold should still outperform.

Mukul Pal, CMT, Orpheus Capitals, Global Alternative Research