Gold (as represented by GLD) and the Gold & Silver Stock Index (XAU) finished the last week on a high note with gains of +1.45% and +1%, respectively. Although, it could be said that gold stocks took investors for a ride in order to achieve the +1% gain. The XAU Index declined as much as –2.5% before regaining all of the lost ground of Tuesday and Thursday of this week.
This week, gold declined –1.31% and the Philadelphia Gold and Silver Stock Index (XAU) declined –1.48%. Below is the Gold Stock Indicator:
Gold increased +2% in the last week while the Philadelphia Gold and Silver Stock Index declined –1%. Below is the level of the Gold Stock Indicator:
In the last five trading days, the Philadelphia Gold & Silver Stock Index has increased +6.47% while the price of gold has increased by +0.28%. Our Gold Stock Indicator is charted below:
Gold and gold stocks, based on the Philadelphia Gold & Silver Index, was unchanged for the week.
This week, gold increased +1.70% while gold stocks, as represented by the Philadelphia Gold and Silver Index (XAU), increased +3.61%. Our Gold Stock Indicator (GSI), is indicated in the chart below:
This week, gold increased +1.54% while gold stocks, as represented by the Philadelphia Gold and Silver Index (XAU), increased +4.56%. Our Gold Stock Indicator (GSI), is indicated in the chart below:
In this post, we’re going to review our Gold Stock Indicator from two perspectives, the Philadelphia Gold and Silver Stock Index (XAU) and the Barron’s Gold Mining Index (BGMI). We were curious about how closely the XAU Index and BGMI would look when applying our GSI formula. We’ve never had the BGMI data set until yesterday. The BGMI data goes back to 1973 while the XAU data goes back to 1983. Based on the charts that we’ve drawn below, we believe that our prior analysis, based on the GSI for the XAU, is confirmed and correct using the last 40 years of data for the BGMI.
On March 3, 2013 (found here), we posted the conservative and extreme downside targets for the price of gold with the following commentary:
”According to Edson Gould’s Speed Resistance Lines (SRL), gold has as a minimum decline of -25% from the closing price of Friday March 1, 2013 to the conservative downside target of $1,179.25. From our experience with Gould’s SRL, the minimum downside target is often achieved, especially when the price experiences an almost parabolic price move to the upside.
The extreme downside target of $681.75, which seems outlandish from the current level. Therefore, we’ll split the difference with an initial extreme downside target of $930.50 until proven otherwise. Already, the $1,179.25 level seems extreme in our minds.”
On December 6, 2013, the update to our downside targets for gold is depicted in the chart below:
During the last week gold and the Philadelphia Gold and Silver Stock Index (XAU) were relatively unchanged. Below is the Gold Stock Indicator from March 2012 to the present.
We’ve noticed an interesting pattern which may suggest that the Dow Jones-UBS Commodity Index is nearing the low. In the chart below, we show (at the red circles) the exact same percentage difference between the long-term technical support (red line) and the 2002 and 2013 low. That percentage difference, approximately 7% in both cases, is all that stands between the two low points and the support level. Our primary question is, will the most recent low sustain a double bottom as was the case in the 2001-2002 period?
Already we have indicated the extreme downside target for the commodity index at 79.32, based on the work of Edson Gould’s Speed Resistance Lines. However, if we are in a commodity bull market, as we’ve made reference to in our January 1, 2009 article titled (found here), then there is a good chance that a bounce at the long-term technical support line would mark the end of the cyclical bear move in commodities.
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Posted in Dow Jones-UBS, ExxonMobil, gold, gold bugs, Sysco, SYY, XOM
