Friday, September 16, 2011

Gold and Mining Shares - Charts

Both Gold and the mining stocks are looking quite dangerous from a chart perspective, both having fallen below short term trend lines.

CLICK CHART TO ENLARGE

CLICK CHART TO ENLARGE

Some recent analysis from The Prince on MacroBusiness suggests that a retrace back to $1600-1650 could be in order which would still only return it to the medium term trend line that runs from the lows in late 2008.

Gary from Smart Money Tracker is suggesting a more serious correction inline with his cycles analysis, predicting a decline back to $1400-1500. Over the last few years the 200 MDA has provided support for the price of Gold and that's currently sitting at just above $1500, so a drop to this level can't be ruled out.

I'm not sure what to think personally at this stage. I'm surprised the breakout in the mining shares didn't last given their undervalued prices, but we could easily see them continue their fall if Gold breaks down further.

Of course for the Aussies, this breakdown in the US price of Gold may not be that important (for AUD Gold) if the Australian dollar continues to break lower as well (keeping the local price of Gold buoyed). However as I've pointed out in the past our local miners tend to follow the sentiment and price action of the US mining stocks. So if the HUI/GDX continue to fall and follow the US price of Gold lower, expect our Gold miners to follow.


BB.

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3 comments:

  1. C'mon BB.
    Just about all analysts have stated lower now. The standout contrarians remaining (again) are James Turk and Santa.
    This is the bottom. BTFD !

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  2. Is it more a case of gold being currently over-valued than mining stocks under-valued and are the mining stocks accounting for that?

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  3. Could be Anon... maybe. I haven't sold any of my positions, based on this short term action. James Turk was one of the few who called the strong move over the middle of the year and now he is calling for $2000 in the short term.

    Mike, my opinion the stocks are undervalued (but Gold is working off a short term overbought level). They were priced at the current level earlier this year when Gold was US$1400 and they were undervalued then as well.

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