Is It Time To Buy Gold? (Updated 2 pm)

There's a ratio I like to look at for timing buy/sell decisions in Gold. This ratio, Gold/Oil, helps to identify overbought and oversold opportunities for gold. The chart below shows buying gold when the ratio is 8-10 usually pays of due to it being oversold and consider selling over 20.

Right now the ratio is at: 663.80 - 66.27 = 10.02 (rounded)

UPDATE 2:30 PM- This chart courtesy of Jim Wyckoff shows a bearish wedge forming in gold- it's always good to have contrary opinions, as it allows one to reassess

Jim Wyckoff- June gold futures have just recently formed a potentially bearish rising wedge pattern on the daily bar chart. Following last week's sharp losses, the market has seen a few sessions of tepid short covering and bottom-fishing by traders.

This minor corrective bounce has formed the rising wedge formation on the daily chart. Bears would gain solid downside technical momentum by pushing and closing June gold futures below strong chart support at last week's low of $654.10 an ounce.

For the bulls to gain some fresh upside technical momentum, they would need to push and close June gold futures above solid chart resistance at $667.50. Gold bulls are keenly worried about the recent rebound in the value of the U.S. dollar versus the other major currencies. Continued appreciation of the greenback is likely to spell doom for the gold market bulls.

However, recently there has been talk about the US$ rising short-term. Typically gold goes up when US$ loses value, but will it be a double bull this time round? Hmm. Here's a good analysis from Decision Point.

The U.S. Dollar is trying to turn up for the fourth time since it topped in 2004, but this bottom looks more promising than the prior three. While the long-term trend is down, this bottom is the third confirmation of the descending wedge formation, a technical configuration which normally resolves to the up side. This wedge is also a long-term formation, so the direction of a breakout has long-term implications.

In the short-term we have a PMO (Price Momentum Oscillator) buy signal, generated when the PMO crosses up through its 10-EMA. Also, the price index has broken above the short-term declining trend line. Medium-term we have a positive divergence as the PMO has been making higher highs corresponding to lower price lows.

On the long-term chart below we can see other positive signs. Most important is the long-term support zone between 78 and 80. There is no guarantee that the support will hold, but we have to view it as being in the plus column. Assuming that the support does hold, the bottom that will result will form a double bottom that spans over two years. Like the wedge formation, this will have very positive long-term implications.

Bottom Line: Let there be no doubt, the trend is down in both the medium- and long-term (our trend model is still bearish on the dollar), and it is too early to assume that a change in trend is taking place; however, there are plenty of reasons to begin nursing some positive expectations.