Trading the Gold Bull – NOT!
October 5th, 2010
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)
“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.”
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.
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Disclosure: Long Junior mining equities