SILVER REACHES NEW RECOVERY HIGH -- ANOTHER LOOK AT PRECIOUS METAL LEADERS -- GOLDCORP BUYS GLAMIS

GLAMIS JUMPS 20% ... The announcement that Goldcorp (GG) is buying Glamis Gold (GLG) is causing dramatic swings in both gold stocks. Chart 1 shows Glamis Gold surging nearly 20% (on massive volume) to a new 52-week high. At the same time, Goldcorp is falling 8.5% on heavy volume. It's not unsual for the buyer to fall while the buyee rises, especially when the buyer (Goldcorp) pays a premium price for the buyee (Glamis). I only point out their chart action because they may be having an impact on the two gold indexes that I follow -- the XAU and the HUI. Both are rising today. But the HUI is closer to an upside breakout than the XAU. That may be due to the 20% rise in Glamis.

Chart 1

Chart 2

HUI VS. XAU ... Chart 3 shows the PHLX Gold & Silver (XAU) Index rising 1.3% today and nearing a test of its summer highs around 150. At the same time, the AMEX Gold Bugs Index in Chart 4 is up nearly twice as much (+2.67%) and closer to its summer high at 354. The relative strength line beneath Chart 4 compares the HUI to the XAU. The HUI/XAU ratio has jumped to the highest level in four months. Part of that superior gain is coming from the respective weighting of the two gold stocks. In the XAU, Glamis (which is rising) has a 4.8% weight while Goldcorp (which is falling) has a bigger weight of 8.7%. In the HUI, Glamis has a bigger weight of 5.3% compared to a smaller weight of 4.8% for Goldcorp. In the long term, it won't make much difference. But today's superior performance by the HUI is most likely due to a heavier weighting in Glamis (which is up) and a smaller weight in Goldcorp (which is down). Precious metals are also rising today. And, once again, silver is the leader.

Chart 3

Chart 4

SILVER ETF HITS THREE-MONTH HIGH ... Silver remains the strongest part of the precious metals complex. It moved sideways over the last month while gold corrected downward. Today the Silver iShares (SLV) are trading at the highest level in three months (Chart 5). Since precious metals usually trend in the same direction, that's giving a boost to gold. It's coming at a good time for gold. Chart 6 shows the StreetTrack Gold Trust Shares (GLD) bouncing of chart support along its summer lows near 60 (see flat line). At the same time, the 20-day Commodity Channel (CCI) Index (top of Chart 6) is bouncing from oversold territory at -100. The daily MACD histogram bars (bottom of Chart 6) are close to crossing above their zero line. The GLD still needs to clear the falling resistance line near 64 to turn its trend back up again. But the upside breakout in silver, combined with strong action in gold and silver stocks, is a positive sign for bullion.

Chart 5

Chart 6

GOLD LEADERS ... Back on August 9, I wrote an article about silver leading gold higher and showed a number of gold and silver stock leaders. I thought it a good time to review some of them to see how they're holding up. Starting with the gold leaders, Charts 7 and 8 show IAMGold and Kinross Gold having broken out to a new 52-week high. They certainly qualify as leaders. So does Barrick Gold (Chart 9). Although ABX remains below its May peak, it's well above its summer peak and is outperforming the XAU Index as shown by a rising ABX/XAU ratio at the bottom of Chart 9. Barrick is the largest weighted stock in the XAU Index. I didn't include Newmont Mining in the August article. Chart 10 shows why. NEM is trading well below its summer highs with a falling NEM/XAU ratio. Newmont isn't participating in the gold rally.

Chart 7

Chart 8

Chart 9

Chart 10

SILVER LEADERS ... Two of the silver leaders that I showed on August 9 are hitting new recovery highs. Pan American Silver in Chart 11 has climbed to a new three-month high (along with the commodity) and remains above its 200-day moving average. The PAAS/XAU relative strength ratio is also rising which shows upside leadership by the stock. Chart 12 shows Hecla Mining even closer to its spring high. Its RS line has been rising since mid June. Coeur D'Alene Mines (not shown here) is outperforming the XAU, but has yet to reach a new recovery high.

Chart 11

Chart 12