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CHARTWORKS - Aug 23, 2011
Top of the Channels

Technical observations of

Bob Hoye
Institutional Advisors
Posted Aug 25, 2011

Written Aug 23, 2011

Gold reached the top of the 10-year semi-log channel this week (when priced in U.S. Dollars). It also reached the top of a thirty-eight year channel when priced in West Texas Light Crude Oil. The 22:1 ratio should provide an improved profit margin for mining companies and be reflected in the mining shares. However, when the peak in the Gold/Oil ratio occurs at the top of its channel and gold is in a rising environment (1973, 1980, 1986, 1987, 1993 and 2009) both gold and the mining shares become vulnerable to a one to three month correction. Typical declines from the highs in the stocks (as represented by the XAU) have been 25% to 35%. The 2009 examples only experienced a 20% decline into the weeks of January 16th and March 13th.

Assuming that the high was seen this week we should be considering purchases following a 20% decline to the following levels: HUI 486, GDX 51, XAU 175 and XGD.TO 21.50.

(Click on image to enlarge)


Aug 23, 2011
Institutional Advisors

Hoye Archives

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