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« Gold: Short End US Rates Matter More Than Long End Real Yields | Main | Alan Greenspan: Ron Paul Was Right About The Gold Standard »
Tuesday
Feb212017

Gold Sector Update – What Stance is Appropriate? 

The Technical Picture – a Comparison of Antecedents


We wanted to post an update to our late December post on the gold sector for some time now (see “Gold – Ready to Spring Another Surprise?” for the details). Perhaps it was a good thing that some time has passed, as the current juncture seems particularly interesting. We received quite a few mails from friends and readers recently, expressing concern about the inability of gold stocks to lead, or even confirm strength in gold of late. In light of past experience, such market behavior certainly deserves to be scrutinized. We felt reminded of another occasion though, when a negative divergence prompted a flood of mails to us as well (not every divergence does).

The HUI compared to gold. It is a good rule of thumb that positive divergences between the HUI and gold are bullish signals and negative divergences are bearish signals. Also, gold stocks should ideally lead gold in order to confirm the prevailing trend. They should be strong relative to gold in uptrends and weak relative to gold in downtrends. As you can see above though, not every negative divergence is meaningful. It can even turn out to be a major misdirection, as happened in early 2016. We published a great many posts  on the sector between August and December of 2015, stressing that we felt a great opportunity was at hand. The brief break of support in January 2016, coupled with a negative divergence,  prompted many people to write in and express concern – click to enlarge.

read more....

interesting article, well worth the read...

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