Fernando Gonzalez, Online Trading Academy
January 9th, 2006
(Special update from 12/12/05 article, for www.Gold-Eagle.com)
It has been quite a tremendous final quarter of 2005 for Gold as the spot price walked right into the $500 per ounce territory without even wiping its feet. In one fast move and in the blink of an eye, we saw $530 on Gold. This was followed by a sharp correction in the 3rd week of December that that took the market right back to below $500. It is very interesting to note, however, that despite the powerful correction that lasted about 12 days, the market came back faster, and stronger towards another new high that takes the market to the brink of $550 - a figure that was unimaginable to most only a few months ago. 2006 has started-out with a real bang.
This of course has dragged that small group of special stocks that benefit from a rise in price on precious metals right through the roof as well. Over the last few months we have had Gold and precious metals up on our radars, anticipating a strong move over the Intermediate to Long-Term time horizon, and but little did I know that we would get a strong reaction so soon, so fast. A strong start is a good sign, no, a VERY good sign of things to come. Many will now say that Gold is overbought over the short-term, and they are absolutely right. But as the market has proven to us too many times before: In an uptrend, overbought conditions all too often lead to more overbought conditions. Let us keep in mind that for the purposes of this analysis, our eyes are trained toward the Intermediate-term time horizon on the minimum.
This week we'll be following-up on our $XAU chart (the Index that tracks precious metals stocks), as well as the Gold ETF and a small group of the rising stars on the $XAU:
- The Monthly chart of the $XAU above addresses the Intermediate-to-Long-Term market
- This is a follow-up to our chart a few weeks ago, to view the status of the market versus the 62% Fib retracement (blue). If the $XAU continues to hold above that key Fib mark (which is right at around the 112 level of the Index), we are looking for the market to continue its march to a new high, and completing point 5 of a long-range broadening formation (marked in blue numbers).
I got a number of e-mails from readers about the $XAU on our last article in November. The $XAU is the Gold/Silver Sector Index maintained by the PHLX and is comprised of 12 individual stock components:
- The Daily chart of GLD above addresses the Intermediate-Term Time horizon
- Some Facts about GLD:
- GLD is the StreetTRACKS Gold ETF (Exchange Traded Fund) that tracks the price of Gold. Like all ETF's its shares are traded like stocks.
- GLD was put together by the same company that invented the highly popular SPY (or "Spiders" ETF, that tracks the S&P500 Index)
- GLD is a relatively new ETF (just over 1 year old), and is one of the most highly successful ETF's in history.
- It is traded on the NYSE, reflects over $3 billion in assets, and trades with relatively good liquidity of over two million shares per day on the average.
- The price of GLD reflects approximately 1/10th the current spot price of 1 oz. of Gold bullion.
- Since the ETF is only 1 year old, we only have so much data to go with (apart from looking at the long-term charts of Gold Bullion itself), however, on the chart above, we mark $47.50 as a critical support area, look for continued strong movement upwards towards the upper $50 as long as price holds the $50 milestone.
- Held trade above $60 (the equivalent of $600 on spot gold) points the market straight to the $100 milestone ($1000 on spot gold), beyond the all-time high. For now, however, we treat the $60 zone as resistance, and only look higher if the market is able to hold trade above it (greater than 1 week).
Below we have some charts of some of my favorite Gold Stocks, each of which are components of the $XAU, and marked with basic technicals accordingly. All of these contain technical structures that point to an early phase of a new long-term Bull Market for the sector. Because of how violent the recent upward moves on some of these charts, these, along with a number of other related stocks have the look of "monsters in the making." Like all our charts this week, we address the INTERMEDIATE-TERM Time frame (6-9 months) at the absolute minimum:
© Fernando Gonzalez 2002-2006
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