Gold! Rush! Time to Be Impressed

 | Jan 03, 2018 | 2:32 PM EST
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Yesterday we covered a number of attractive/bullish looking precious metal mining names. We started with the mining names because they tend to make bigger percentage moves compared to the actual metal. We are not leveraged thrill seekers but I know from experience that I can stay with equity names and sleep better at night than if I dealt with the futures market or the world of ETFs or ETNs. Nevertheless, RealMoney (RM) readers are interested in the SPDR Gold Shares ETF with the well know symbol of (GLD) . Here are some observations about the GLD and the continuous gold futures contract.

In this daily bar chart of GLD, below, we can see a sideways to higher trading range market for this instrument the past year. Prices have zigzagged above and below the 50-day and 200-day moving average lines but recently we can see that prices are now above both rising averages. While prices have not really trended higher, the On-Balance-Volume (OBV) line shows a steady rise the past year. The Moving Average Convergence Divergence (MACD) oscillator turned up above the zero line last week for an outright go long signal. A close above the September high around $128 should convince any reluctant bulls that gold is going higher.

In this five-year weekly chart, below, I show a longer-term view of the continuous gold futures contract. I have outlined a large triangle formation. Prices are close to the upper trend line and a potential breakout. In the lower panel the 13-week momentum study shows that momentum is at the top of its range. Momentum is not diverging from the price action and this adds to the probability that resistance around $1350 will be broken.

Bottom line: When gold futures rally and the mining companies do not participate you should be skeptical. When mining companies lead and gold futures and ETFs are strong you should be impressed.

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