Wednesday, October 21, 2009
Gold stocks - Overbought?!
Sometimes (often times, actually), it helps to step outside one's usual patterns of looking at markets to see things from a different perspective. I did this recently with a major "blue chip" global Gold mining index known as the "TSX Global Gold Index" ($SPTGD) from the Toronto exchange (here's a link to a list of the constituents in this index)
A chart of this index may help make things "clearer" for the bullish case on the current intermediate-term bull market move in the price of Gold and Gold stocks. Here's an 18 month daily chart of this index ($SPTGD) that is up thru Monday's close:
And how about this proprietary speculative junior mining index chart reprinted without permission from the Long Wave Group up thru about 9-10-09 (by the way, read their latest missive for a Gold price prediction during what they are calling a deflationary depression):
We've had an 8 month uneventful and healthy correction from a "global" perspective in the senior Gold mining sector as well as in the speculative small cap junior Gold exploration and mining sector. In fact, these charts suggests that many Gold miners have missed the ENTIRE party in global stock markets since March! That is about to change. The Gold bull is raging and the ongoing secular credit contraction is far from over. A nasty drop in the stock markets will add kerosene to the Gold bull as people dump stocks and scramble for safety at a time when T-Bill yields are essentially zero. A yield of zero means even paperbugs would have to admit there is no value in holding T-Bills and no real opportunity cost in holding Gold. Gold will fulfill its historic role in preserving wealth as the scramble for safety intensifies. Those who dig wealth out of the ground will be rewarded.