GOLD SHARES BREAK LONG-TERM SUPPORT LINES AS NEWMONT TUMBLES

GOLD STILL OVER 200-DAY LINE, BUT XAU ISN'T ... A bounce in the U.S. dollar is starting to put some downward pressure on the price of gold. The last time I looked at the gold market was on April 18 when it was bouncing off its 200-day moving average (along with the Euro). Chart 1 shows the Gold ETF (GLD) falling the equivalent of nearly $5 today. Most of the downside damage, however, is being seen in gold stocks. Chart 2 shows the Gold & Silver (XAU) Index falling to a new low. The daily chart of the XAU Index tells only a small part of the story. The weekly and monthly charts look even worse.

Chart 1

Chart 2

XAU BREAKS LONG-TERM SUPPORT LINES ... The last time I showed the next two charts was also back on April 18 as the XAU was testing long-term support lines. Those support lines have now been broken. The weekly bars in Chart 3 show the XAU violating a rising trendline extending back to the summer of 2002. It now appears that the XAU is headed for a test of the low hit in the spring of 2004 near 77. The monthly bars plotted in Chart 4 (with a logarithmic scale) show the XAU violating a rising trendline extending all the way back to late 2000. Gold stocks have definitely take a turn for the worst. Newmont Mining (the biggest stock in the XAU) has fallen to the lowest level in nine months and is putting downside pressure on basic materials. A big drop in oil is pressuring energy stocks. MORE ON THAT LATER.

Chart 3

Chart 4