GOLD FOLLOWS SILVER TO NEW HIGHS -- SILVER STOCKS STILL LEADING GOLD STOCKS HIGHER -- SILVER STANDARD RESOURCES NEARS BREAKOUT -- GOLD MINERS ETF CHALLENGES MARCH HIGH -- A NUMBER OF GOLD STOCKS HAVE HIT NEW HIGHS INCLUDING GAMMON GOLD
GOLD HITS RECORD HIGH... Gold prices are hitting a new record today as shown in Chart 1. That shouldn't come as a surprise to readers of our increasingly bullish commentaries on precious metals over the last month. The line above Chart 1 shows silver prices having already risen to a new three decade high. Since those two commodities usually trend in the same direction, silver's prior breakout gave a strong signal that gold would soon do the same. As has been the case for weeks, silver stocks are rising faster than gold stocks. Several gold stocks are, however, hitting new 52-week highs.
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Chart 1
SILVER BREAKOUTS... Last Thursday, I showed the Global X Silver Miners ETF (SIL) bouncing off its 50-day moving average. Chart 2 shows the SIL nearing a new high in today's trading. Several individual silver stocks are at or near new 52-week highs. Chart 3 shows Coeur D Alene Mines (CDE) hitting a new high today. Others that are close to doing so are Silver Wheaton (SLW) and Silvercorp Metals (SVM). My March 8 message on rising silver stocks breaking out to new 52-week highs carried the headline: "Silver Standard Resources May be Next Silver Stock To Do So". Although it took a little longer than I thought, Chart 4 shows SSRI on the verge of a new 52-week high. Several gold stocks are doing the same.
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Chart 2
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Chart 3
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Chart 4
GDX TESTS RESISTANCE -- GAMMON BREAKS OUT ... Gold stocks in general have been lagging silver stocks. Chart 5, for example, shows the Market Vectors Gold Miners ETF (GDX) having bounced off its 200-day average last week and clearing its 50-day line on Monday, but still well off its December high. Although the GDX includes several silver stocks, it's dominated by stocks tied to gold. While the GDX is just now clearing its March high, a number of gold stocks have already reached new 52-week highs. That list includes IAMGOLD (IAG), Harmony Gold (HMY), New Gold (NGD), and Gammon Gold (GRS). Chart 6 shows the upside breakout in Gammon Gold. Part of the reason for its superior performance is that it produces both gold and silver. Another gold stock that's close to a new high is Goldcorp (GG) shown in Chart 7. The buying of precious metals is just a continuation of the rotation into commodity assets which is largely the result of a falling U.S. Dollar.
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Chart 5
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Chart 6
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Chart 7
S&P 500 TRADES OVER 50-DAY AVERAGE... Another important point made in previous messages that's worth repeating is that silver usually outperforms gold in a strengthening economy because of its industrial usage. That's also a bullish sign for stocks in general which may explain why the S&P 500 is trading above its 50-day moving average at midday (Chart 8). A close above that line would confirm that the recent downside correction has ended. Foreign stocks are also acting a lot stronger. Chart 9 shows Emerging Market iShares (EEM) trading at a two-month high. Chart 10 shows a broader measure of foreign stock performance which is the Vanguard FTSE All-World ex-US (VEU). That ETF offers a simple way to achieve foreign stock diversification. Notice that it is clearing its 50-day average. The VEU has a 25% weight in emerging markets which is no doubt helping its recent performance. It also, however, is gaining strength from Europe (45%), Asia (23%) and North America (7%). The north American portion is Canada which is one of the world's primary beneficiaries of rising commodities and a weaker dollar (see Tuesday's message). The fact that foreign markets are starting to rise faster than the U.S. is also a side-effect of a falling U.S. currency.
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Chart 8
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Chart 9
