This morning the major stock market indexes are all starting under pressure. However, gold and gold miners are trading sharply higher this morning to start the session. The move higher in the gold sector comes as many investors are under the impression that the Federal Reserve Bank will try and stimulate the markets. Even though the fed funds rate(overnight lending rate to the large major banks) is essentially at zero percent and cannot go any lower the U.S. central bank still has some tricks up it's sleeve. Therefore, should they increase the money supply in order to create and induce inflation in the markets gold will and has revealed that. Please remember that the Federal Reserve bank no longer reports M3 money supply. Therefore, the price of gold has told us when they increase or decrease the money supply. It does not look as if they have decreased it in years.
Newmont Mining Corp (NYSE:NEM) is trading sharply higher this morning by $1.38 to $57.42. This stock is now above it's daily 20 moving average and that could be viewed as a short term positive for the stock. However, should the market indexes decline sharply by a strong wave of deflation everything in the gold sector could decline. Newmont Mining Corp will have short term intra-day resistance around $58.00.
Yamana Gold Inc (NYSE:AUY) is another mining company that has rallied higher with the gold sector this morning. This stock is still trading below the daily 50 moving average and that is a negative for the stock and sign of weakness. However, should the stock rally higher in the coming days the $10.25 level will be strong daily chart resistance. Intra-day the stock has resistance at the $9.80 level and the $10.00 area.
Spot gold and the gold miners are all having a solid move on the day. However, it is important to remember that while this sector is usually a safe haven for traders and investors it can and will decline if the deflation scenario takes hold. Therefore, please don't take it for granted that gold and gold miners always go up when the markets trade lower.