Friday, December 21, 2012

Gold & Gold Stocks- Updated Chart Analysis

Gold and the gold/precious metal stocks traded up today, as traders positioned portfolios for a higher probability that the U.S. enters into a Fiscal Cliff scenario. To some, today's trading may look positive, as gold and the related equities gained relative to the market. In my opinion, this is just a technical bounce and represents nothing more than a counter-trend move within the broader decline. Just look at the charts.

Gold- GLD

Firs, the Gold Spiders Trust (Ticker GLD), traded up marginally today. It is trading into the yesterday's gap (essentially closing it), but on much lighter shares, 13.4 million vs. 25.2 million. This tells me that there was no conviction behind the move today and lower prices are still in offing.

Market Vectors Gold Miner Index ETF (Ticker GDX)

A similar trading pattern was seen on the GDX. The GDX traded up marginally on just 11.4 million shares. This is short of nearly all the days the GDX traded day since the sell-off on November 14. I believe this suggests there are sellers still in the gold miner shares, as down days in gold typically weigh on the miners. That said, I think the downside in the gold miners is limited and potentially see only $3, at most downside from current prices. In fact, the gold miners are closer to a buy than sell at this juncture.

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