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Trading the Gold Bull – NOT!

|Includes: SPDR Gold Trust ETF (GLD), SLV

Trading the Gold Bull – NOT!

By: Marco G.

October 5th, 2010

http://goombarhsedge.blogspot.com/

 

The author shows a few pictures and summarizes the Gold Bull for our readers. 

The 24 hour chart for Gold priced in USD is quite interesting this morning.  (click on figure to enlarge)

Live 24 hour Gold Chart Pundits attributed the Gold price action to the twin surprises enacted overseas last night.

From Japan:

“The central bank yesterday cut its benchmark overnight interest rate for the first time since 2008 and pledged to hold it at “virtually zero” until officials foresee a sustained end to deflation.”

From Australia:

Australia’s central bank unexpectedly left its benchmark interest rate unchanged for a fifth straight month, triggering the biggest drop in the local dollar in almost two months amid signs of cooling domestic demand.

Gold reacted by increasing in value to the twin currency drops overseas.  Using the GLD ETF as proxy, the chart is below.  (click on figure to enlarge)

The upward rising trend shows no backing off, remaining strong since the beginning of August 2010.  In fact, looking closely, Gold seems to have gapped upwards this morning, in the turquoise circled action.

Looking at the Gold equities, an examination of the impacts on the large gold miners (15 unhedged mega cap gold miners) index the HUI is following.  (click on figure to enlarge)

The large miners have not been performing very well recently, even with the rising prices of Gold.  This index was sluggish and not leveraging the underlying Gold prices.  The chart above in the turquoise oval shows that this index may have just broke through a triple top in the charts.  Maybe these large cap miners will now do some catch up.

Then, looking at the overall markets, the chart of the SP 500 index is following.  (click on figure to enlarge)

 

The SP 500 is also on the rise this morning, continuing in the rising trend since the beginning of September.  Its interesting that both the general equities market and the precious metals market are both rising.

Summation of Gold Bull and Rising Markets

Based upon the above and previous commentaries, the author posits:

1.      Gold Bull markets can not be traded, or you will be left behind.  As shown on the chart, there have been no serious declines.  The Gold Bull market is now happening.

2.      Equities leverage the gains of the underlying precious metals.  Even the laggard large cap equities are now starting to move upwards as is now happening. 

3.      Junior equities will provide the best gains, leveraging the underlying metals prices as is now happening.

4.      Silver will gain more than Gold in this round, as is now happening

5.      Best gains are realized when the general markets are sound, as is now happening.

 

 

Disclosure: The author is long junior mining equities.

Important Disclaimer

The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.




Disclosure: Long Junior mining equities