To 321gold home page

please click banner to support our sponsor.
Home   Links   Editorials

ChartWorks (snippet)
Gold Into Capitulation Mode

Technical observations of RossClark@shaw.ca

Bob Hoye
Institutional Advisors
February 10, 2005

Those who monitor gold prices will be well aware that the decline since the December 3rd high of $456 is beginning to feel excessive. As a matter of fact there are only eight occurrences since 1972 where gold has fallen at a pace capable of generating concurrent daily oversold readings in both my exhaustion model and summation index. I categorise this as a capitulation signal. We have a new one today
[Editor's note: written Tue 8th].

This weakness comes at an appropriate time, following the January 1st Economic Confidence Cycle date.

In a major uptrend (rising 233-day moving average) the capitulation signals have resulted in an upside reversal within 48 hours, retracing 40% to 50% of the total decline. This has been followed by a consolidation of 8 to 13 weeks and then a re-instatement of the underlying uptrend with an explosive upside move lasting months and making new recovery highs. Mining stocks can be anticipated to recover with the gold price.

While the gold price is definitively oversold, the XAU (88.59) and HUI (192.37) have achieved only initial oversold readings and are still above measured targets. We can be aggressive bottom pickers as the XAU approaches 86 or the HUI closes in on 184.

The following table outlines the action of Homestake Mining (HM) in the six months following the previous signals. Homestake Mining was used for research purposes due to the minimal history of the XAU and HUI. (A comparison of the 1997 signals in the XAU & HUI generated similar results to the Homestake analysis). During declining years Homestake consistently rallied by 24%, while in the three uptrending years (1972, '73 & '74) rallies were much stronger. This year the gold price is straddling the uptrending 233-day moving average.

Bob Hoye
Institutional Advisors
E-mail
bobhoye@institutionaladvisors.com
Website: www.institutionaladvisors.com

CHARTWORKS - FEBRUARY 8, 2005


Hoye Archives

The opinions in this report are solely those of the author. The information herein was obtained from various sources; however we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized.

Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or options or futures contracts. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report. In addition, investors in securities such as ADRs, whose values are influenced by the currency of the underlying security, effectively assume currency risk. Moreover, from time to time, members of the Institutional Advisors team may be long or short positions discussed in our publications.


321gold Inc