Gold Stock Update
It’s been awhile since we posted an update of precious metals and the their stocks. There isn’t much positive that can be said for the action since the end of November.
I’ve posted 17 individual equity charts tonight covering the largest components of the various gold & silver indexes plus daily charts of GLD, SLV and GDX. The charts are posted alphabetically.
A few things about the charts:
- These are all daily HLC bar charts on a log format. The log chart setting is a bit deceptive, but it was chosen because the channel for GDX (what i consider the gold equity standard) has been very accurate since it began from the 2008 bottom.
- The charts are pretty straight forward and simplistic, covering basically the same time frame from of the late 2008 collapse in price. These are not long term charts, but the channels tell the story over roughly 1.5 year period.
- Focus on the GDX chart. It being the composite of the components, it speak volumes.
- Some of these stocks are holding up much better then others. Others are just pathetic and should be shot.
What I’m seeing and my general conclusions:
- Continued lousy under performance of gold stocks relative to the underlying. The $XAU:$GLD ratio is the one of the biggest clues - I watch it closely.
- GDX dropped under its dotted mid line and cannot regain the upper half of the channel. It also has formed a bear flag consolidation under the mid line and has as of now broken out of it as of today.
- Many of the RSI indicators exude negative divergences with price starting late last year.
- The majority of these stocks are unable to hold onto their dotted, purple 200 day moving price averages.
- The large volumes that we saw coming into these stocks beginning in September appear to have turned into distribution over the last 4 months.
- Gold stocks are probably now one of the worst performing sectors over the last 12 months.
I still believe gold stocks are an excellent leading indicator of gold prices and the risk trade in general. Gold stock price action seems to be indicating that deflationary pressures are highly likely to return. Of course this doesn’t have to be the case, but these stocks appear to be discounting something very serious on the horizon and it’s not benign disinflation. When things start to look better, I’ll give another update.
