The Magic of the Golden Cross-Over in Gold, Silver, HUI

Peter Degraaf
Posted Jul 2, 2009

A Golden Cross-over, or Positive Cross-over is when the 50 Day Moving Average (50D), moves above the 200 Day Moving Average (200D).

There are three kinds of these patterns.

1. The cross-over occurs when both the 50D and 200D are falling.

2. The cross-over occurs when the 50D is rising, while the 200D is falling.

3. The cross over occurs when the 50D and 200D are rising.

The first pattern is rare, the second pattern is common and the third pattern is the most bullish.

Quite often the third pattern takes a bit of time to develop, after the cross-over occurs. The momentum of the rising 50D soon causes the 200D to follow the 50D upwards.

Before we look at the charts, here is the conclusion.

→ When the fundamentals are supportive, the most bullish phase in any stock or commodity is when the 50D has made a Golden Cross-Over and the two moving averages (50D and 200D) are rising. The cross-over has to be in synchronization with the fundamental direction, otherwise the trend will be short-lived.

Featured is the daily gold chart as of Tuesday June 30th. The cross-over occurred in February and provided ample opportunity for buyers to get on board. It took a while for the 200D to rise but now it is rising along with the 50D. The supporting indicators (RSI and MACD) are positive. While there may be resistance at 940 and 985 along the way, this bull market is alive and well.

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Featured is the daily silver chart. The Golden Cross-Over occurred in March and marked the first time the 50D had been in positive alignment to the 200D since August 2008. The 200D is just now beginning to turn up. The supporting indicators are at support levels. A breakout at the blue arrow will end the current pull-back and will turn silver bullish again.

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Featured is the HUI index of gold and silver stocks. The Golden Cross-Over occurred in April and was the first time the 50D traded above the 200D since June 2008. The 200D is just about to start rising again, for the first time since July 2008. The supporting indicators have just turned up from support levels. The immediate target for HUI is at 400. The longer-term target is at least 550.

In previous articles I have tried to point out that much of the 'hype' surrounding Global Warming is just that: 'hype'. In the current edition of Rolling Stone (July 9-23 edition) you will find an excellent article by Matt Taibbi. This article points to the real culprits behind this hoax and how it will affect your investment decisions. [Editor's note: This article apparently is ONLY in the hard copy vers. of Rolling Stone, ie: it is not available in the online vers. of Rolling Stone.]

The 'cap and trade' bill that is working its way through Congress will turn out to be the largest tax increase in US history. Members of the House voted on this 1200 page monstrosity without even reading it! Where is the outrage?

-Peter Degraaf

Peter Degraaf is an online stock trader with over 50 years of investing experience. He issues a Weekend Report for his many subscribers. For a sample copy, or a 60 day free trial, send him an email: itiswell@cogeco.net or visit his website www.pdegraaf.com.

DISCLAIMER: Please do your own due diligence. I am NOT responsible for your trading decisions. -Peter Degraaf

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