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Gold vs gold stocks: internal momentum still holds swayClif Droke
GSR snippet
Before we get into the outlook for gold stocks, let's briefly take a look at the gold price situation. After peaking over the psychological 1,000 level at 1,008 on March 18, the price of gold plunged to a closing low of 887.50 on April 1. Along the way the gold price violated the dominant interim 90-day moving average, something it hadn't done in over seven months. With this violation of the 90-day MA in early April, despite the subsequent recovery back above it two days later, we have a technical breach of an important interim trend line. This begs the question, "Does the temporary breach of the 90-day moving average mean that the gold bull market is over?"  Long-term, the answer to that question is no, for the main longer-term trend lines are still up and unbroken. Intermediate term, there are some questions that remain to be answered but there looks to be enough internal momentum judging from the momentum gauges that gold's price should retain its buoyancy through this challenging market environment it has entered this spring. There are two important indicators we can look at to get an idea of just how challenging gold's interim outlook appears to be. For one thing, we can look back at the past history of the gold proxy, the streetTRACKS Gold Shares ETF (symbol GLD), which seeks to follow the price of gold. Let's go back to a period similar to early 2008 when GLD had risen too far and too fast above its 90-day moving average. Back in May 2006, GLD spiked to a then-record high of 720 before falling nearly straight down to the 550 level before finding support and reversing its decline. In the process of peaking in May 2006 and correcting, GLD violated its dominant interim 90-day moving average in June 2006, which interested the 600 level at that time.
--Clif Droke 321gold Ltd |
