GOLD STOCKS RISE AS DOLLAR FALLS -- EURO HITS TWO MONTH HIGH -- CANADIAN ISHARES EXCEED 2000 PEAK AND RISE ALONG WITH COMMODITIES
GOLD SHARES RISE ALONG WITH THE EURO... More dollar selling is boosting gold prices more than $3 higher today (Chart 1). The Gold/Silver (XAU) Index has already broken out to a new three-month high. Since gold stocks usually rise faster than bullion, an upside breakout in the yellow metal is more than likely. I've written about the positive correlation between the Euro and gold. Chart 3 shows the Euro rising above 1.33 for the first time in two months. That also increases the odds for higher gold prices and commodity prices in general. The CRB Index is trading at a new 24-year high today. Some of the day's percentage leaders are silver, copper, and natural gas. Other foreign currencies are rallying today as well.
Chart 1
Chart 2
Chart 3
CANADIAN DOLLAR BREAKS OUT... The Canadian Dollar is having a very good chart day. Chart 4 shows the "loonie" clearing its 50-day moving average and a down trendline drawn over its November/January highs. The Japanese yen is also trading higher, but has yet to clear its 50-day average. I think it's just a matter of time before that happens.
Chart 4
Chart 5
JAPAN ISHARES TEST JANUARY HIGH ... Japan iShares are in the process of testing their January high. The recent price and volume pattern looks bullish to me. The fact that the biggest trading bars over the last month have been green shows a lot of buying going on. Remember that the EWJ benefits from rising Japanese stocks and a rising yen. An upside breakout in the yen could be enough to push the EWJ to a new recovery high. The monthly bars in Chart 7 show that the EWJ is on the verge of reaching a new four-year high. The fact that its 2004 consolidation was "triangular" in shape greatly increases the odds for an upside breakout. I continue to believe Japan represents one of the best global values.
Chart 6
Chart 7
CANADA ISHARES EXCEED 2000 HIGH... I've written many times that Canada is one of the primary beneficiaries of a falling dollar and rising commodity prices. That's because it's a big producer of basic materials. A strong Canadian Dollar also attracts foreign capital. The monthly bars in Chart 8 show the recent surge in the EWC has pushed it above its 2000 peak to a new record high. It's been outperforming the S&P 500 since 1999 when commodity prices started to bottom. And it's been moving up with commodity prices since 2002 (when the dollar peaked). The last two charts show a reasonably close correlation between the Canada iShares and the CRB Index both of which are hitting new highs.
Chart 8
Chart 9
