Memorial Archives

Gold Sector Chart Update
posted Jul 31, 2004 at 01:39PM

A Quick Note

My current view of the gold sector remains unchanged. It has completed a first leg of a secular bull. It is now in the process of correcting that entire move and that lower prices lay ahead. This move will correspond to similar countertrend action in the USD.

The rationale for this view has been covered in prior commentaries, but centres around the unwinding of the reflation trade and the general weakening of liquidity conditions.

The HUI/Gold ratio is my main "check" in case this assessment proves to be wrong.

In the short term, the back-testing I was expecting was a little slow in developing - but looks to continue and may offer opportunities for nimble traders with proven risk management criteria.

This would correspond with some consolidation in the USD and a short term countertrend rally in equities in general.

The conventional wisdom of avoiding illiquid stocks is particularly relevant in this environment.

100% cash remains my default position.

Price Action

Gold Daily

Gold Weekly

Gold Monthly

The lack of divergence on the stochastics and the levels reached by the ADX trend strength indicator (not annotated) are what make me feel that this was a first leg of a bull market and not the completion of a counter-trend rally within an ongoing bear market a la 1987.

HUI Daily

HUI Weekly

HUI/Gold Ratio

Unhedged vs Hedged

TSE Gold Index Chart

Greenback Update

Yield/Spread Update

Good Trading

Bullet Bullet Bullet