 PIVOTAL EVENTS - JULY 28, 2005
The Gold Sector is Drifting
Bob Hoye
Institutional Advisors
Aug 1, 2005
Golds: Where the base metal mining stocks
are testing the highs in establishing a cyclical peak, the gold
sector is drifting after enjoying a brief initial rally that
may have set the end of a cyclical bear.
Gold, in dollar terms, recently
slipped nervously down to 419 on July 14. This compares with
the last big low of 412.6 in February. That was when the dollar
index was at 85 and, now at 90, it seems that gold has been performing
well against a firmer dollar.
Gold has also been gaining
in real terms as our gold/commodities index recovered from 185
on June 1 to 202 on July 1. This needed a test of the low and
perhaps the 188 on July 13 was it. This week it's at 194 and
breaking above 202 would set the uptrend.
Of course, it's important to
look to the pending increase in investment demand. This could
eventually be consistent enough to gradually increase gold's
dollar price even in the face of a steady to firm dollar index.
As we have been noting, this
will be indicated by the next phase of credit spread widening
and the reversal in the treasury curve from flattening, which
is symptomatic of the boom, to steepening, which is one indication
of the inevitable contraction.
The gold/silver ratio is also
part of the financial equation. It goes down in a boom and, in
declining from 82 in June, 2003, it anticipated the end of the
bull market in gold stocks at the end of 2003.
Going the other way, when it
increases it anticipates or confirms a contraction and therefore
a contra-cyclical bull market for gold stocks. The low for the
gold/silver ratio was 55.3 on June 1, which seems to be a huge
test of the 56.6 low in December.
The ratio recovered to 62 on
July 5 when it slumped with the party to 59.6 today.
The June low could be tested.
Bob Hoye
Institutional Advisors
E-mail bobhoye@institutionaladvisors.com
Website: www.institutionaladvisors.com
PIVOTAL EVENTS JULY 28,
2005
Hoye Archives
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