Copper/Gold ratio - Looking weak again

Analysis

• The rebound in the copper/gold ratio seems to have stalled - or at least paused. We think that a drop below 4.16 would highlight the underlying deteriorating fundamentals, at least with regards the demand side.
• The rebound in the stochastics also seems to be stalling - a cross lower would not bode well.
• Outside of the technicals, we feel that the EU debt issues, US budget deficit talks and signs of a slower Asian economy are likely to dampen the economic outlook further, which may well send copper prices lower while boosting gold. This would mean the ratio continues to weaken.
• Gold is likely to rise even further if negotiations on cutting the US deficit get heated again.

Conclusion

We would see a fall in the ratio as being a negative for copper and for industrial me