GOLD AND SILVER START TO BOUNCE ALONG WITH THEIR RELATED SHARES -- GLD CLEARS 50-DAY LINE -- THREE GOLD LEADERS ARE GOLDCORP, YAMANA, AND KINROSS GOLD -- GOLD MINERS BULLISH PERCENT INDEX IS OVERSOLD BUT HAS YET TO TURN UP
GOLD ETF CLEARS 50-DAY LINE; SILVER TRYING TO BOTTOM... Precious metals have caught a bid over the last two days after lagging behind everything else over the last two months. The good news is that both gold and silver are finding chart support near previous lows, which is often the start of a bottoming process. Chart 1 also shows the SPDR Gold Trust (GLD) climbing over its 50-day average today for the first time in two weeks. Short-term momentum indicators like RSI and MACD have yet to turn positive however. Chart 2 shows Silver iShares (SLV) bouncing off previous chart support formed during May. It's also finding support near its 200-day average (red line). A lot of investors poured into silver a few months ago as it neared a test of its all-time high near $50. By comparison, silver looks like a much better bargain at current levels.
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Chart 1
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Chart 2
MARKET VECTORS GOLD MINERS INDEX ALSO CLEARS 50-DAY LINE... Precious metal shares have been among the year's worst performers. Chart 3, however, shows the Market Vectors Gold Miners ETF (GDX) reclaiming chart support along its January low. The GDX is also trading above its 50-day average (blue line) for the first time in two months. It still needs to clear its 200-day average (red line), however, to really improve its chart pattern. Two of the larger gold stocks are already above that long-term resistance line. In fact, one of them never fell below it. Chart 4 shows Goldcorp (GG) bouncing off its 200-day line during June and moving back above its 50-day line today. Unlike most gold stocks, GG also remained well above its January low. That accounts for its rising relative strength ratio (below Chart 4). Chart 5 shows Yamana Gold (AUY) surging above both moving average lines today. Upside volume has also increased over the last two days. Its leadership within the group can been seen by the rising AUY/GDX ratio below its chart.
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Chart 3
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Chart 4
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Chart 5
KINROSS GOLD TESTS 200-DAY LINE... Kinross Gold (KGC) also deserves special mention. Chart 6 shows the stock surging to the highest level in three months on rising volume. It's now in the process of testing its March intra-day high (at 16.80) and its 200-day moving average. KGC has also been doing better than the entire group as shown by the rising KGC/GDX ratio (below Chart).
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Chart 6
GOLD MINERS BULLISH PERCENT INDEX IN OVERSOLD TERRITORY... A handy technical tool to help spot bottoms (and tops) in gold-mining shares is the Gold Miners Bullish Percent Index ($BPGDM). That's the black line in Chart 7. The indicator measures the percent of gold miners that are in point and figure uptrends. Readings over 80% are normally overbought, while readings below 30% are normally oversold. The last two times the Gold BPI fell below 30% was at the end of 2008 and the start of 2009. Both marked important bottoms for gold stocks (orange line). The fact that the group is oversold isn't in itself reason enough to call it a bottom. The line has to actually start rising. That's where Chart 8 comes in. Most traders who use this indicator prefer to get their buy and sell signals from its point & figure version. At the very least, traders like to see a three-box reversal to the upside to signal a possible bottom. Since each box in Chart 8 is 2%, the indicator would have to climp 6% from its recent low at 28 to signal a possible upturn. In other words, a $BPGDM reading of 34% would be an added incentive to start mining for gold and gold shares again. [Note: The $BPGDM is not included in the BPI list on the Market Summary page. You can, however, chart it yourself by simply clicking in its symbol on a line or p&f chart].
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Chart 7
