Gold Action #346 - Snippet (Gold, Silver, NEM + More!)
Dr. Clive Roffey
Bullion is ready to break above the critical $370 resistance level. Meanwhile all the global equity indexes look to have completed their bear market rally. The chart of the FT100 has a rising wedge indicating a substantial and sharp fall. Suddenly the economic data emanating from the US does not appear as rosy as many commentators would have us believe. But this is not my main concern.
For some time I have detailed that whatever is driving the markets is a global phenomena not just a local effect. This is what scares the daylights out of me. What is it that is likely to result in a continuation of the major bear trend in equity markets to much lower longer term levels and at the same time force the gold price through to much higher ground? It is not up to me to postulate answers to these questions. My work is simply to evaluate trends and attempt to follow them, and when possible to warn of potential trend reversals.
We are at the crossroads of such a trend reversal. On my work the Dow has been in a rally since last July. And that’s all it is, a bear market rally. As always the top of the rally signals the most euphoric state of the market. This is typified by US market sentiment that is more bullish than for several years. I am not a contrarian analyst, but I must admit that chart analysis is frequently at loggerheads with market sentiment and the ruling fundamentals of the day.
I have several times shown my gold value chart that has indicated every major turn in the gold stock market for the past 20 years. I detailed several times that gold stocks for the past three months were in a major value buying zone. This chart has started to lift off its base and indicate that a new bull trend has commenced for gold stocks.
In the last issue I analysed several US gold mutual funds and classified them according to their performance relative to the XAU index. I received numerous emails requesting data on the Merrill Lynch International Gold fund. I have not been able to source the historic data for this fund. There are several sites with a chart of this fund but I need historic data to analyse. If anyone can supply this I would be grateful.
Have you noticed that despite the correction in the silver price, the main silver stocks have been doing exceptionally well for the past three months. This is another indication of the stocks leading the metal price. I remain extremely bullish on silver stocks. Many people ask about platinum stocks as this metal has a greater industrial usage component than either gold or silver. Frankly I feel more comfortable with gold and its hard asset capabilities than I do with industrial usage. I am sticking to gold and silver stocks in preference to their platinum cousins.
The gold price pushed up last May to hit the major overhead resistance level. Since then it has been churning whilst it gathers up enough momentum to thrust above this critical $380 to $400 resistance. Note that the whole picture from 1990 is a huge pan handle base pattern, sometimes called a skillet or cup and handle. Whatever it is called it is a huge base formation that portends much higher prices. Forget about the negative Elliott wave theorists calling bullion down to $250. They lost it over three years ago. Watch the shares, they tell you the true picture, especially Newmont!!
The silver price has lagged the gold market in its relative performance. But the long term lagging performance is ready to change trend into a superior performance to US equities. Once again there is a reverse head and shoulders base pattern indicating a much better future prospect.
Dr. Clive Roffey
chartist@global.co.za
www.shareaction.co.za
Technical Analysis Course : www.charts.co.za
Website analysis : www.utm.co.za
Email : chartist@hotmail.com
Gold Action is a fortnightly commentary on global gold markets produced
by Dr. Clive Roffey who has been a leading independent commentator on
gold markets since 1969.
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