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Gold Stock Prices Turned Back (Again) – Where to now?
Gold Stock prices have been turned back again
from major resistance. The 3rd time in a year! What does it mean? Are we
entering another gut wrenching correction or will we reverse higher?
Can I be forgiven for asking if Gold
shares will ever break out?
Chart 1- Gold Stock prices bouncing off major support for the 3rd time in a
So what’s really happening here?
1 – Gold has been a relative underperformer versus the stock market for the
last 6 months. Now that momentum is waning in the stock market, Gold Stocks
are slowing down alongside.
2 – Gold shares are schizophrenic and don’t believe that Gold is going a lot
higher and prefer to act like regular penny stock listings.
I vote for the later.
The establishment banks have been trying for months to sweep the sub prime
problem under the carpet. It just won’t go away. Fears of credit problems
continue to spread. A friend at a big American bank tells me there are no bids
out there for CDOs or CLOs. The latter being the instrument of choice for
Private Equity capital raisings!
Credit spreads are widening and no matter the spin, this credit problem will
continue to grow and chip away at market confidence.
And that’s when Gold will shine. Gold stocks are by nature counter-cyclical
and Gold bullion is the ultimate safe haven. When confidence turns to fear,
the HUI will take out 370 and move much higher.
But for now the level of confidence is still high. Investors prefer to move to
the safety of Bonds or Foreign Currencies. In time they will realize that
these financial instruments will also suffer from credit problems. The whole
globe is fuelled by debt and that debt is beginning to implode along with the
level of confidence.
Sit tight because this is a great buying opportunity to load up on those Gold
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Greg Silberman CA(SA), CFA
I am an investor and newsletter writer specializing in Junior Mining and Energy
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This article is intended solely for
information purposes. The opinions are those of the author only. Please conduct
further research and consult your financial advisor before making any
investment/trading decision. No responsibility can be accepted for losses that
may result as a consequence of trading on the basis of this analysis.