Tuesday, September 2, 2014

Gold Breaks, but Watch the Equities

As of this writing, gold prices are off more than 1% and depending on the chart you may be looking appear have to broken some support lines. For instance, look at the GLD. This is as traders have come back from their August vacations and as a few wire houses have been noting that maybe September will not be as seasonally as strong as in past years.

That said, gold has not broken the 1,265 support line positioned by some, including Kitco's Wagner.

More importantly, the equities are still holding in their. As I have stated (supported by others' and my own analysis) numerous times, the equities tend to lead the yellow metal on the upside and the downside. Numerous equities can be held up as examples, but one of the companies most leveraged to the price of gold is Royal Gold- RLGD, and the stock refuses to break the support line. Just look at the chart of RGLD below.

The same pattern, albeit not showing the same relative outperformance, can be seen in the GDX and the XAU. As long as the equities hold the line, I will side on the thesis that we will see higher prices in the precious metal investment complex.

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