Bit of weekend reading. A few charts to play with. Gold stock sentiment indicator.
Thursday was a good day for juniors.
The indicator has improved markedly to over 65%. Expecting well over 70% but not holding my breath.
This is the second highest level the indicator has been since 2015.
A reversal on the indicator will have me looking at taking profits.
Even more impressive is the number of stocks now in an uptrend.
Monday night there were 57, now there are 89 with another 20 lined up to break through resistance.
Most consolidations have broken out to the upside but producers are still sitting very close to trend. I am expecting another >20% on the producers.
A lot of targets have been set particularly on producers. I do not expect these to be taken out on the current run.
There are 222 gold stocks in my list and increasing.
The capitulation sell-off about a month ago did a lot of damage to the juniors. Most collapsed and many stayed down. I consider the speed and depth of this move very bullish.
Resistance was taken out with ease by those now in an uptrend.
A lot of money is now flowing back into specs.
Very, very reminiscent of Christmas, 2015.
I am going to include a little more information this time around.
The spread between futures and spot has blown out to $70 again.
Here is the current indicator.
For reference, here is the indicator for 2015/16. Dates at the bottom.
Note the capitulation sell-off. Lasted about a month. Bottoming pattern for a month. Then the breakout.
The indicator then operates at a higher level, at least for the lows for the next 6 months. Then wasn’t a bull market but may have pretended to be.
The difference between then and now is what took at least 4 months is now happening in a month.
Hopefully we can identify the next top and it holds for at least a week.
The highest the indicator has been is on this chart.
I have thrown the HUI up for comparison. A similar pattern to that above except in time frame. 4 months compressed into 1.
The sell-off, bottoming and run up.
Did you like the double bottom above? Here is another.
The is the USD spot gold price chart. A nice double bottom. Close to trend as well.
There was a previous double bottom under the down trend which presaged the low in the gold price.
A third double bottom is highlighted on the left. The DT/DB combo highlighted was complete on the 20 Sept, 2010. Then the US gold price exploded.
Just under 12 months later gold hit US$1,900. A 50% increase in less than 12 months.
We have an almost identical set up RIGHT NOW, except in speed and scale. In USD terms, gold can go anywhere. Even plenty of room for a pull back. But I don’t think so for the time being.
A similar though expanded DB/DT combo now completed.
The 2010/11 highs are a good psychological barrier for a pull-back. What happens will happen. Don’t second guess.
Here is the USD gold price chart from 1990.
Interestingly, the trend held throughout the GFC. You are unlikely to have seen anything like this before.
This is a strong trend and the diagonal was in place from 2001 to 2011. Pretty cool eh? There are a couple of DBs at the beginning of the uptrend.
For working out price moves this chart is not the best. Inclined to trade well away from the trend.
The AUD gold price chart is next.
Only have data back to 2015 therefore I am using A$ GOLD ETF as a proxy. The ETF began in 2003, the earliest data on this chart.
This ETF is 1/10th of 95% of the A$ price of gold. The 5% covers fees and helps maintain some cash liquidity.
Unlike the chart above, you can see the trend break in 2007. Unlike the USD gold chart, the price in AUD trades mostly within a channel. Not too far from trend.
If it trades outside the channel there is a snap back towards trend.
If gold continues to trade within the channel then it can rise to A$2,850 or $200 above the current price without correcting.
No reason it can't go outside the channel. Only a guide anyway.
As previously mentioned, producers HAVE NOT made the gains necessary to prevent going into a down trend if prices fall from here.
The extra $200 will generate the >20% gains required to absorb a short reversal. Not going to post charts from any of the 89 stocks in a uptrend. Plenty out there already.
Here is one more chart of value and another reason gold is likely to move higher.
This is the XGD. If this reverses from here the trend is gone and I do not believe gold stocks are going into a down trend or bear market.
7,200 is a reasonable target, a little over 10% higher than it is now. An extra A$200 in the POG should do that.
To be honest, this type of break out of consolidation usually results in a rapid increase, possibly to new highs. I expect this to go towards 8,000 quite easily. Reproduced as a reminder.
I do not usually look at currencies but the way the market is shaping up I thought it prudent to generate a chart.
There was clearly a capitulation sell-off in AUD with 50% of those falls now recovered.
Plenty of room for the AUD to continue up. My guess is 70c.
Before it gets there a shorter term chart has resistance at just over 65c.
One of these two prices are likely to coincide with a bit of a reversal in stock and gold price.
I was bearish AUD but have changed my mind. May even see a trend change within 12 months.
Will capitulation portend a change in trend for AUD/USD as it did for gold stocks?
Australia may be considered as one of the first countries to return to ‘normal’ with virus elimination. Parts of the country still functional. Spread limited. Mines still open.
The AUD could be quite strong compared to other currencies. Will attract foreign investors into markets.
CONCLUSION
The only chart where consolidation and limited upside expected is A$ gold price.
Much better upside potential for US$ gold price, gold stocks, XGD and AUD/USD.
A reversal on the sentiment indicator will be my trigger for taking profits. A new high expected here.
I cannot put a time frame on this. All happening at 100 mph.
REALLY looking forward to the next few months.
None of this is advice. To me it is how all the charts appear to tie together.
May we all prosper.
