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Gold Stocks Set To Overwhelm Gold

Morris Hubbartt
Weekly Market Update Excerpt
posted Nov 23, 2012

US Dollar Indicator Rollover Chart

  • The topping process in the US dollar is accelerating. Currency analysis requires patience, because during a rollover, technical indicators can move at a snail's pace.

  • The declining indicators are accompanied by weak volume, suggesting the price of the dollar is heading quite a bit lower.

  • My focus is the neckline on the head & shoulders top at 78.60. Once the dollar closes below that level for two consecutive trading days, a downside target of 73 will be in play.

  • Note the clear sell signals on both technical indicators. I like to see the slow Stokes falling under 80, soon after the CCI has spiked to at least 200. These indicator sell signals suggest there is a high probability that the right shoulder of the h&s top will quickly collapse.

  • This bearish US dollar chart is very good news, for gold investors!

Gold Arc Breakout Chart

  • My technical analysis indicates that a major long term bottom is in place, across the entire precious metals sector. The intermediate term target is $2015, but gold could move even higher before correcting significantly.

  • When CCI spikes lower, as it did recently, followed by RSI touching the 30 level, a trending move higher is very likely.

  • Note the large green Fibonacci arc pattern that I have highlighted. Gold rose to the outer arc in September. From there, it pulled back, bottoming in early November.

  • Gold has now exhibited several daily closes above that outer arc, which is very bullish. The short term target is $1850, and it could be acquired quickly.

GDX Arc Action Chart

  • The technical pattern in GDX that is developing is bullish. Fibonacci arc analysis suggests that once GDX closes over $53, a new bull leg is in play.

  • My intermediate term target is $66. If gold overshoots $2015, I believe GDX could rise to $72.

GDX Overwhelms Gold Chart

  • Fundamental and technical analysis suggests higher gold stock prices are coming. What is most compelling about gold stocks is the undervaluation of the sector against gold itself.

  • On this chart, you can see that GDX is as cheap as it was during the meltdown of 2008.

  • There is a substantial head & shoulders pattern in play now. Aggressive investors could consider selling some bullion, and using the proceeds to take an overweight position in gold stocks.

  • I am projecting that gold stocks will rise to about .44 on this ratio chart, which is almost a 50% gain from the current price.

GDXJ Uptrend Time Chart

  • The debt crisis could transform into a currency crisis. That would create a surge in demand for gold. The source of new metal is junior mining companies.

  • Fundamentally, gold juniors probably have more to offer than any sector in the precious metals sector. Senior companies are having a hard time proving up new reserves.

  • In the short term, I expect GDXJ to acquire a price of $28 per share. That would take it to the outer edge of the Fibonacci arc, and usher in an enormous trending move to the upside.

Silver Turn and Confirm Chart

  • Silver is my second largest holding. Sentiment seems to be, “just about right”, for a powerful move higher.

  • Bob Moriarty of 321Gold recently pointed out that the premium on the Sprott Physical Silver Trust hit an important low. This is very encouraging.

  • Silver is trading about 27% off its highs of last summer. Note how similarly CCI and RSI are positioned now, compared to the August period. A huge rally occurred then. I expect an even bigger one now.

  • After pulling back to the downtrend line that defined the entire correction, silver is beginning to move higher. All my “technical lights” are green!

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Nov 23, 2012
Morris Hubbartt

321gold Ltd