Gold Sector Update
posted Jul 9, 2005 at 04:49PM
Gold Daily Chart
HUI Daily Chart
HUI - A Closer Look
In the end I have little to say that I didn't in last week's edition. Trying to decide on a stop just based on a HUI price level seems a bit hit or miss. In that regards I made up my mind to focus on the HUI/Gold ratio to warn me if something is amiss.
A major disappointment was the Gold COT data. This data, to my knowledge, should incorporate the $13 drubbing that took place at the bookends of the holiday weekend. I was expecting to see a sharp reduction in the number of commerical short positions but that development did not materialize.
It reinforces my thought that bullion itself is still in a corrective process.
This data is mitigated by the silver COT data, which looks more constructive. As well, the US COT data continues to put in fresh records for the net commerical short positions.
Looking at everything though, I think bullion will remain under pressure. I would see any break-out to be of dubious quality and a retest of old highs simply being a B wave with another C wave down to follow. This would correspond to a wave 4 correction for the dollar followed by one more leg up. All this to thouroughly prepare the ground for a dominant gold bull leg.
As such I think one should really clarify in one's mind what one is buying as a core holding...looking forward one to two years from now, and what one is buying for trading purposes.