Major buy alert
The prospects for gold and
silver stocks are better than they have been for the past 10
months. Gold's strong move on Friday above its 50-day moving
average signalled that its 6-month corrective phase is almost
complete, and that it is now very unlikely to break down from
its long-term uptrend channel and that it should start to move
ahead strongly soon.
On the 3-year gold chart we can see the fine long-term uptrend, and the positive action late last week, with gold breaking above the steeply falling 50-day moving average for the first time in over 2 months, greatly increasing the chances that the long-term uptrend will hold, and signalling that we are very near to completion of an intermediate base area below the resistance at $400. It is interesting to note that the duration of the correction from the January peak, approaching 6 months, is almost the same as the ascending triangle correction that followed the February 03 peak. This time symmetry is not surprising, given that the correction brought the price down to touch the long-term trendline. The only circumstance that would justify a shift back to an intermediate bearish outlook for gold would be a break of the long-term uptrend line.
The gold share market did not appear to fully grasp the significance of the move in gold on Friday, and staged only a modest advance. However, the HUI index is well placed to break strongly above its 50-day moving average and should do so over the next week or so. There is considerable resistance in the 210 - 250 area on the HUI arising from the large trading range that developed between October and April, but the effects of this are expected to be mitigated by a substantial improvement in sentiment as gold moves higher.
On the 6-month silver chart
we can see how the price has been held down at a low level due
to the huge damage to sentiment caused by the April collapse.
However, sentiment is steadily recovering from that trauma, and
what appears to be a symmetrical triangle base looks to be close
to completion. From the point of view of timing it is important
to observe the interplay of the 50 and 200-day moving averages.
Note how this base area has formed in the vicinity of the still
rising 200-day moving average, implying that the April plunge,
although dramatic and severe, was a correction within a larger
uptrend. Observe also how the price has remained suppressed until
the 50-day moving average has had time to come down close to
it. Silver is now in position to break sharply higher with gold
and we are quite likely to see a strong move above the 50-day
moving average towards $6.50 that synchronises with a gold break
The dollar chart looks decidedly negative, with the index having broken down from a bearish rising wedge that took it up to the falling 200-day moving average. The larger downtrend appears to be reasserting itself and we can expect new lows in due course.
Descriptions of some promising stocks follow for subscribers, which includes some of the stocks listed in the "Time to Buy" article that went up on the 19th May. That list remains valid.
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20 Jun, 2004
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