Gold Sector Update
posted Feb 19, 2005 at 10:10PM
Contending with short-term price and moving average resistance.
Dow Jones Gold Index
Remains on short-term buy mode. The stochastics are near overbought so one should pick individual stocks carefully.
So far so good but there are some resistance metrics that need to be cleared. Closing over the 200 dma is a necessary event to trully declare the gold sector in a full fledged bull-move. Even better is confirmation of a break of trend-line resistance.
US Dollar Fib Study
At Fib support
US Dollar Daily
The dollar is not dead yet, but if it is going to stage a come-back it has to do so soon. The 50dma is a key support level. Quite frankly I think the scenario calling for a multi-month rally starts dying with a close under that metric. The bearish MACD cross now puts the dollar in short-term bear mode.
The Gold sector continued to consolidate under key resistance points. for bullion this means the 50dma and more importantly the 430 price level.
The dollar rests on top of fib support along with some moving average support just below.
Personally, from purely a technical perspective, I think it is too early to say whether the bottom is in for gold and and it is going to be upwards and onwards from here. I would like to see the HUI/Gold ratio get above the 200 dma at the least. Bullion is currently testing the 430 level which was once a break-out. Untill it closes over that on a weekly basis one has to consider the potential, and that is all it is now, potential, for a failed test.
There are a lot of potential inverted H&S patterns for both the dollar and the gold sector. From a trading perspective I remain on sidelines. I have some exposure to inflation friendly scenarios with a preference to energies. I also maintain a high cash position and want to see how things continue to develop before committing more.