Saturday, November 21, 2009
Gold Stock Fractal Thought
A particular reader (ahem, cough, cough, Chemical!) is frustrated by the perceived lack of performance in the Gold mining sector. Gold is at new highs but Gold stocks are not. I believe this provides a good buying opportunity, but has this ever happened before where the Gold price is making new highs but the senior Gold stock indices aren't?
Here's a potential fractal that is ripe for a repeat in terms of what comes next. I believe Gold stocks are going to play "catch up" to the Gold price soon in an explosive fashion, regardless of what the general stock market does. A steep correction could occur, first, of course, but here a chart of the S&P Global Gold Index ($SPTGD - the green area plot) versus the price of Gold ($GOLD - the black line plot) over the past 10 years using a weekly log scale chart:
A repeat of this pattern would see us appreciate in the senior Gold indices by about 50% over the next 4-5 months. We'll see what happens...