GOLD AND SILVER PRICES CONTINUE TO RALLY -- MARKET VECTORS GOLD MINERS INDEX MAY BE NEARING MAJOR BULLISH BREAKOUT -- BARRICK GOLD NEARS 52-WEEK HIGH-- GOLD SHARES ARE STARTING TO OUTPACE BULLION
GOLD AND SILVER ETFS CONTINUE TO RISE... With stocks and most commodities on the defensive, money continues to move into precious metal assets. As a result, gold and silver prices are higher again today. Chart 1 shows the Gold Trust Shares (GLD) approaching a test of their summer highs. Chart 2 shows Silver iShares (SLV) having recently achieved a bullish breakout. Not surprisingly, precious metal shares are the day's strongest group. Chart 3 shows the Market Vectors Gold Miners Index (GDX) nearing a test of its 2010 highs. The GDX/SPX ratio (top of Chart 2) has already reached a new high. That chart looks even stronger from a longer-term persepective.
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Chart 1
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Chart 2
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Chart 3
GOLD SHARES NEAR RECORD HIGHS... The weekly bars in Chart 4 show that the retest of the 2010 highs by the GDX is also a test of the top line in a bullish "ascending triangle" that's been forming since last November. [An ascending triangle is identified by a flat upper line and a rising lower line and is normally a bullish pattern]. The GDX/SPX ratio (top of chart) has already reached a new high. Chart 5 looks even stronger. It shows that the GDX also approaching a test of its 2008 high. A close above that barrier (which appears likely) would be even more bullish. Also encouraging is the fact that the GDX/SPX ratio (top of Chart 5) has already reached a record high.
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Chart 4
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Chart 5
BARRICK GOLD NEARS UPSIDE BREAKOUT... One of the gold leaders that I featured recently -- Eldorado Gold -- has already reached a new high. Barrick Gold (ABX) is close to hitting a new 52-week high as well. ABX also happens to be the biggest holding in the GDX. The weekly bars in Chart 6 show Barrick also testing the upper end of a bullish ascending triangle. Its RS line (top of chart) has already broken out. Assuming Barrick can clear that hurdle, it's next upside target would be a challenge of its 2008 high. Its RS line is already approaching that chart barrier. Needless to say, the trend in Barrick will have a larger influence on the GDX because of its heavier weighting.
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Chart 6
GOLD SHARES STARTING TO OUTPACE THE METAL ... For the first time since the spring, gold shares are starting to outpace the metal. Chart 7 shows the GDX/GLD ratio attempting to clear its May/June highs. Although both assets are rising, an upside breakout by the stock/bullion ratio would suggest that gold stocks are a stronger bet than bullion at the moment. I've explained in several previous messages that gold shares are normally one of the few assets (outside of bonds) that normally do especially well in a deflationary environment.
