Thomas
DeChastelain
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Gold Sector Update
posted Jun 3, 2006 at 12:55AM

GLD Daily




GLD Weekly



HUI Daily



HUI - A Close-up Look at Price Action



US Dollar



Trading Thoughts.

Well I am still of the mind that gold equities will continue to churn their way up while in bounce mode. Bullion has held support at the 50 dma and one can expect at least some technical buying at this point. The dollar does not look like it is going anywhere, and needs to pull in some more bears (how many more can there be?)before any kind of meaningful rally takes place

Quite frankly this is a very tough environment to make any money in short-term trading unless, you are putting large amounts at work. You have to get a lot of things right: your choice of trading vehicle, your entry point, sticking with the stock in a choppy consolidation environment.

I do not like the technical set-up on the HUI at all. The price pattern to date has been bearish. The stochastics are in "head-fake" mode and the RSI is heading up into the mid-level resistance zone.

Although short-term I still the think that the sector will work it's way up in a northern direction, I am becoming more bearish for the IT term.

Previously I was thinking that the gold sector would form some nice consolidation triangles, which would mean that we had already seen the lows. Short term traders love it when they nail the lows of potential triangles, because sell and buy points are fairly predictable.

But right now I don't think we are going to get a triangle. Instead I am thinking that the HUI will chop upwards and then slowly roll over in a rounding top fashion.

The move upwards will coincide with the dollar moving to lower lows and the HGX bouncing as well.

The trouble is that the USD has not shaken off enough bears to really sustain a deep move down, so I think it is "setting up" for a more meaningful counter-trend rally. One of the things I would be looking at are the currency COT data, especially to see if the commercials continue to increase their long positions on the USD.

During this time I think gold will go through the equivalnent of a "C" wave to finish out its correction.

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