Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
VR and Gaming Becomes the Metaverse - 7th Dec 21
How to Read Your Smart Meter - Economy 7, Day and Night Rate Readings SMETS2 EDF - 7th Dec 21
For Profit or for Loss: 4 Tips for Selling ASX Shares - 7th Dec 21
INTEL Bargain Teck Stocks Trading at 15.5% Discount Sale - 7th Dec 21
US Bonds Yield Curve is not currently an inflationist’s friend - 7th Dec 21
Omicron COVID Variant-Possible Strong Stock Market INDU & TRAN Rally - 7th Dec 21
The New Tech That Could Take Tesla To $2 Trillion - 7th Dec 21
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Stocks- Time to Buy?

Commodities / Gold & Silver Stocks May 02, 2008 - 05:38 AM GMT

By: Brian_Bloom

Commodities

Best Financial Markets Analysis ArticleFrom a trading perspective, the charts are showing that it might be “buying time” in gold shares.

Let's look at three relationships:

  1. The relationship of the speculative $HUI to the less speculative $XAU
  2. The relationship of the $HUI to the gold price
  3. The relationship of the $XAU to the gold price

The daily chart above of the $HUI:$XAU (courtesy stockcharts.com ) shows a dive in the MACD into deeply oversold territory. The RSI is also in deeply oversold territory and appears to be bouncing up.

If we now look at the weekly chart of the same relationship below, we also see signs of encouragement

The first important point is that, in the longer term weekly relationship going back to July 2005, the 50 week Moving Average has remained consistently above the 200 week MA. Any bounce in the chart of the daily relationship will occur within the context of a Primary Bull Market.

The second point is that there are tentative signs of an uptick in the RSI

Now let's look at the $HUI relative to the gold price. On the weekly chart below there appears to be some significant support at the 0.46 level – which is where the ratio sat as at May 1 st 2008.

By itself, the above chart is not particularly revealing. Of course, if it falls any lower it will need to signify a change in trend relative to gold – which is certainly not apparent from the HUI:XAU relationship. It therefore follows that the 0.46 level is probably close to a bottom. It is more likely to bounce up than down.

Now, if we look at the XAU:GOLD relationship (which is/should be less volatile relative to the HUI:GOLD relationship) we see signs of a stirring:

Note the two blue arrows indicating the possibility of a “double bottom” and also note the series of rising bottoms in the MACD. By implication, if the XAU:Gold ratio breaks up, one would expect the $HUI to move up sharply relative to the XAU – which we have already said seems highly likely given the deeply oversold ratio of HUI:XAU in the first chart above.

Finally, the weekly chart of the XAU:GOLD shows a recent upside crossover of the MACD above its MA

Strictly speaking, this is nothing to get excited about – except that the daily chart is showing signs that it wants to stir. Given this latter fact, we might anticipate that the weekly ratio will break above its 50 week MA.

Conclusion

If you are one who likes to buy low and sell high, this is probably buying time.

Validation

The weekly gold price chart below shows a “possible” further fall down to around $800 an ounce. However ….

What is starting to look interesting is the relative positioning of the blue MACD bars (in oversold territory) and the RSI (at around the 50% level).

In a Primary Bull market, the weekly RSI will rarely fall far below the 50% level which, again, shows we might be close to a bottom.

Finally, let's look at the Point and Figure chart. I have selected a 2% X 3 box reversal chart merely because it shows an interesting picture.

What this chart shows is that, based on the “vertical” measured move technique, a level of $752 might be expected. But, in this analyst's experience, the vertical count is more reliable if it is forecasting a destination within its Primary Trend. i.e. If I have a  view that the Primary Trend of Gold is “up” then I will be more inclined to accept a measured move target using the horizontal count method. In any event, for “trading” purposes, I am generally inclined to want o believe the horizontal count target.

In this case, the horizontal count target is around $830/ounce.

If we look at where $830 is on the weekly bar chart above, it looks like that may well be a bottom.

Overall Conclusion

Whilst the gold shares may not rise in absolute terms in the short term, they look like they want to start rising in relative terms:  XAU relative to Gold, and HUI relative to XAU.

The gold shares seem to be looking to gold to reach a bottom and, if gold does bottom, gold shares might very well start to outperform gold on the upside.

Now looks like a good time to buy gold shares – if you happen to be a trader.

By Brian Bloom

www.beyondneanderthal.com

Author's note: In anticipation of the launch of Beyond Neanderthal, I am preparing an article which will begin to “open the kimono” on precisely what it is about gold that has been grabbing my attention these past few years.  To get the full story, you will have to buy the novel (for which you can register interest at www.beyondneanderthal.com ).  But the article should certainly pique reader interest. Let's just say this: It ain't about money.  Hopefully, it will all start coming together by mid May.

Copyright © 2008 Brian Bloom - All Rights Reserved

Brian Bloom Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in