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Gold - Keep an Eye on Newmont Mining

Commodities / Gold & Silver Stocks Jul 02, 2007 - 08:44 AM GMT

By: Mario_Innecco

Commodities The share price of Newmont Mining, the second biggest gold minig company in the world, recently touched an almost two year low of $38.08 on the 27th of June. This was the lowest level for NEM (ticker symbol) since August 2nd, 2005! It also marked a very significant drop from the high of $62.72 reached on January 31st, 2006.


It would seem that Newmont Mining's share price has no future and that the gold mining sector is not the place to be at the moment but if one looks at the bigger picture it is possible that what we have witnessed in the last sixteen months is nothing more than a gut wrenching correction in a long term bull market. It happened in the mid 1970's when the price of gold dropped from around $200 in 1975 all the way down to around $100 in 1976 before it started its ascent to $887.50 in January of 1980!

The first chart below shows the fibonacci retracement in the Newmont share price since the beginning of its bull market in October 2000. Newmont bottomed at $12.75 in October 2000 and traded all the way to $62.72 in January of last year. As can be seen NEM failed to hold the 38.2% retracement of the above-mentioned move. We think, nevertheless, that the recent low at $38.08 is near enough the 50% retracement of $37.735 to probably point to a probable low.

The second chart shows a falling wedge formation which is usually a counter trend corrective move in a bull market. If NEM holds the $37.75/$38.00 area and goes on to trade above ( above the $43/$45 level) the white trend line of the falling wedge in the next couple of months or so it could be pointing to a new leg up in the gold mining sector bull market.

Chart 1

Chart 2

Charts from Bloomberg.

By Mario Innecco
ForSoundMoney.com

At ForSoundMoney we stand for a hard currency. We believe in a monetary system based on commodity money and a free-market banking system where central banks are non-existant.

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