Thomas
DeChastelain
Memorial Archives

Gold Sector Update
posted Mar 12, 2005 at 04:14PM

Gold Daily



Good price action. Will need sustained strength to overcome some over-bought readings.

HUI Daily



On the whole a positive week, particularly the close over what was the 220 resistance line. Friday was disappointing in that it lost ground despite a strong bullion price.

HUI/Gold Ratio



The weak Friday ruined what was shaping up to be a bullish break-out over the 200 dma. Bulls do not want to see the 50dma being broken.

USD Daily



Hitting oversold...yet again. We are now formally in bottom testing zone.

Bonds vs Dollar




Over the past few years, any meaningful countertrend rally has usually been accompanied by higher yields (falling bond prices). So far the recent weakness in bonds has not helped the dollar. A sign of the dollar about to crater? Maybe. Contrarian dollar bulls keep waiting for the long awaited but yet to arrive multi-month rally.

Trading Thoughts.

Bullion is in the same technical condition that saw the dollar rolling over. Will the same happen here? My feeling is that there will be some retracement that will make the itchy fingered think so, but superior fundamentals should stem the tide. I would expect that the neck-line of the inverse H&S on gold should hold.

Breaking under is bearish.

From a sector perspective, there is no reason to sell stock here, but I would not be adding here either. The near overbought status of bullion along with Friday's weakness in stocks suggests that the week will start with some retrenchment. As well the Macclellan Oscillator is flasing some bearish divergences as well.

I would look for bounces off moving average support. If they break then stay away.

On the whole however the dollar remains on a sell, and gold on buy. Gold, oil and lots of cash I think is a good asset mix to have.

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