DOLLAR FALL BOOSTS GOLD AND GOLD STOCKS
DOLLAR HITS FOUR YEAR LOW -- GOLD JUMPS $5... One of the intermarket principles we follow is that a weaker dollar usually translates into higher gold prices. The Dollar Index dropped to the lowest level in four years today. As a result, gold prices jumped more than five dollars. Gold has been showing more strength during April. The daily MACD lines turned up at the start of the month. Today's gold jump puts bullion above its 50-day moving average for the first time since February. A close above $340 would be another show of strength. We had been looking for major support to materialize around the $325 level. The monthly chart shows why. Gold stocks jumped over 2% today and were the day's strongest stock market group. Newmont Mining was also one of the market's strongest stocks.
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NEWMONT MINING... Newmont Mining was one of the market's biggest gainers today. The daily chart shows the big gold stock bouncing off its moving average lines on rising volume. The daily RSI and MACD lines are positive. The weekly chart puts things in better perspective. For the past year, NEM has been in a huge triangular-shaped consolidation pattern within an uptrend that started during October 2000. In our view, that's a bullish pattern. If Newmont is bottoming here, chances are good that gold is too.
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GOLD INDEX ALSO ABOVE CHART SUPPORT... The chart of the AMEX Gold Bugs Index (HUI) looks similar to that of gold. The HUI achieved a multi-year bullish breakout early last year. Since last spring, it's been consolidating about the 1999 breakout point near 100. This still looks to us like a pause in an ongoing uptrend. [The HUI includes only "unhedged" gold stocks and, as a result, shows a stronger trend than the more widely-followed XAU Index. Rising gold bullion gives a bigger boost to unhedged gold stocks].
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