The following chart of gold shows the 65-week moving average has been supportive for gold since the 9-11 tragedy. This moving average also halted the decline in gold in April of this year.
Chart 1 Gold Weekly
In the following chart, we also see the long-term monthly moving average was supportive in the mid 90's. After acting as resistance in early 2002, gold broke decisively through this resistance on it's way up to the highs of February around $385 (New York). This moving average then became support once again, halting the decline in gold in the spring of this year at just under $320. Gold has since accelerated to new recent highs, closing today at roughly $395, a new 7-year high.
Chart 2 Gold Monthly
The following multi-decade monthly chart of gold shows a secular bull market in its infancy. Notice the MACD stretched to the 120 level at the peak of the previous bull market in gold in 1980, but it has only just crossed the zero line into positive territory very recently. Despite what some in the media are saying about gold being "tired," the reality is we are in the very early stages of what will in all probability be a very, very long secular bull market in gold.
Chart 3 Gold Multi-Decade Monthly
The following multi-decade quarterly chart of gold shows we are very early in this secular bull market in gold. Note the MACD is just making its way to the zero line, when in 1980 at the peak of the previous bull market in gold it reached as high as the 150 level! Also note the RSI crossing above the 50 line with conviction for the first time in over 16 years, which is also very constructive.
Chart 4 Gold Multi-Decade Quarterly
Next I would like to move on to Newmont Mining (NEM). My charts of NEM and my commentary were published by Richard Russell on June 17th of this year (charts are updated and current):
"The following chart of NEM shows the breakout you have been describing. Looking back at past advances from NEM the 100 monthly moving average has acted as excellent support when it goes into a 'bullish' phase."
Newmont had closed at $33.84 when that was published, but the current chart shows the nice continuation pattern towards the $45 area.
Chart 5 Newmont (NEM) Multi-Decade Monthly
"The quarterly chart shows the 50 quarterly moving average has been supportive during Newmont's bullish moves. NEM is attempting to break out above that resistance and a quarterly close above that area at the end of June would be extremely positive. Note the RSI breaking above the 50 line in '02 for the first time in many years which also looks constructive."
The updated chart shows NEM punching through the resistance and heading up strongly to the $45 area. RSI which had just broken above the 50 line when the above was published on June 17th, is now showing strong conviction for the first time in over 7 years.
Chart 6 Newmont (NEM) Multi-Decade Quarterly
The next set of my charts and commentary were published by Russell on June 21st of this year:
"The following daily and weekly charts of NEM show 500 is an important number on both moving averages. This daily chart shows the 500 daily moving average which has acted as excellent support for NEM on a number of occasions since the beginning of 2002."
The updated chart shows how strong NEM has been during its latest advance. Although Newmont is extended above the daily support and may correct long-term, the action in NEM is very strong.
Chart 7 Newmont (NEM) Daily
"The following chart of NEM shows the 500 weekly average has provided excellent support during bullish moves in Newmont. Recently that average acted as resistance in '02 as shown on the chart. NEM has just broken above this moving average for the first time in about 6 years. In this chart Newmont's shares briefly broke below the 500 weekly average in early '97 before having a tremendous snap back rally above the moving average. Its share price cratered in late '97 when it decisively broke this support."
Newmont closed at $33.60 when the above was written, again the updated chart shows NEM's strong upward progress closing today at $43.91. You can see the strength of the money flows as well.
Chart 8 Newmont (NEM) Weekly
"What does it all mean? It is possible for Newmont to shake back down below the 500 weekly moving average all the while staying bullish technically (above daily support) before breaking decisively above the weekly average and continuing it's long-term advance. Subscribers should keep this in mind and not be shaken out of Newmont if this temporary reversal was to occur."
The above still applies and the 500 daily and weekly averages will provide support on any declines in NEM if necessary. Not saying we will pull back to these averages, but they are there for support in the event they are needed.
For the record, Richard Russell did an excellent job of calling the dead lows of the gold pull back in April of this year. This was Russell's commentary at the lows in April:
"Today gold actually opened higher at $321.70...Also, although gold closed lower for five days in a row, neither the XAU or HUI confirmed by breaking to new lows. In fact XAU and HUI made their lows on March 27...My conclusion is that there's a good chance that gold is either at it's low, or that gold is in the process of bottoming."
Very nice call, Richard, and very fruitful for your subscribers who acted on that call by purchasing gold/gold stocks.
On May 6th of this year after the big shakeout in gold, Richard Russell published some of my gold charts and commentary, but the final portion of my commentary will be true throughout this bull market in gold:
"I hope all of your subscribers are keeping their eye on the 'big picture' with regards to gold and gold stocks. Smart money will take advantage of weakness in gold and gold stocks to accumulate while the weak hands are shaken out of what in all probability will be a very, very long bull market in gold."
The bottom line here folks is that when there are significant shakeouts or periods of weakness in gold and gold stocks, "smart" money will use those periods to accumulate positions.
Eric King
November 12, 2003