Thomas
DeChastelain
Memorial Archives

Gold Sector Update
posted Feb 11, 2005 at 11:48PM

Bullion Daily



Bullion Weekly



HUI Daily



HUI/Gold Ratio



USD Daily



Commentary

I am not going to give too many declarations this issue. The past week was one of those weeks when trying to stay on a even keel just seemed harder than usual.

My one buy and hold "experiment" is doing quite well, and that is gratifying from a financial viewpoint but it rubs my nose into one of my pet predjudices...i.e. buy and hold is for morons. Real skill is the gunslinger that can hop in and out of stocks with almost magical ease.

The trouble is when I look at all of my trades over the past three years it becomes obvious that hanging on to certain stocks just a little more tightly, would have had been much more profitable.

Of course that sentiment was only exacerbated by the fact that the basket of oil stocks I sold awhile back are all continuing to chug higher.

Mind you the use of anal stops does keep one out of trouble and last week was a great example when I bailed out of a speculative telecom with a minor loss the day before the floor dropped out. As I mentioned on the chatboard I felt like someone who had just missed stepping into an empty elevator shaft.

So the dilemna remains - finding a way how to keep losses minimal and yet be able to ride winners for longer periods. I hope to do a piece on that which hopefully will not only clear things up for myself, but give others some insight on their own trading styles.

Aghh...the gold sector. Well, we had some very bullish reversal price action off of "obvious" support levels.
The HUI moved through the 200 resistnace level with ease and that alone can be considered a short-term buy signal. The index now resides just under more serious resistance

HUI/Gold Ratios moved through its 50 day and is tickling the 200dma.

From a Fib time perpective, if this is even just the start of a countertrend rally, we should have a few weeks of relatively buoyant stock prices. In other words it seems safe to get back into the water.

The 65 week moving average as been the line of support for the past three years for bullion and until price action dictates otherwise, bounces off that line must be respected.

As for myself I have not yet entered any trading positions. I was too focused on the HUI itself, and by the time it reversed I hadn't noticed that the primary basket of stocks that I track had already bottomed the week before and already had nice moves up. So I will be trolling for other candidates and in the meantime observe what happens at short-term resistance.

Now I was buying some gold stocks but those were in some washed out gold explorerer that I think offer good long term spuculative value...in other words I intend to hold on to them... not trade them...even if gold still has one more washout down the road. (You would be laughing if you could see how my face is twisting in horror at the concept)

Until the HUI/Gold ratio breaks main trend-line resistance I still see rising gold prices as being in a countertrend rally, and certainly will use stops in trading positions.

Why not more bullish?....One the dollar is not dead yet. Two is the potential of falling long bond prices (higher yields) to extend the dollar rally further than people expect. Remember every significant countertrend rally for the dollar over the past three years has been accompanied by falling bond prices. Bonds continue to defy gravity but if they roll over they may give the dollar a big lift and that would put pressure on the gold sector.

Good trading

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