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Main | Gaining Exposure To The Junior Gold Mining Sector »
Wednesday
Oct092019

Gold Miners Are Set Up For Huge Gains

Introduction

The fortunes of the gold mining companies are of course totally dependent upon finding and extracting the underlying asset of gold itself, so this is where we will start. Gold was unloved and derided as an investment for six long years until its recent breakout when the price rose from sub $1200/Oz a year ago to a high of $1555/Oz in August 2019. Having gained some $300/Oz in just three months a correction was due and as with all rallies they run out of steam. The correction so far has been in the order of $100/Oz and as the chart below shows the overbought position has been unwound. This doesn’t mean that gold cannot go any lower, it most certainly can, but the chart suggests that the selling has slowed and that we may see some sideways action before gold resumes its rally. We are of the opinion that this pullback will be short lived, and we are fully intent on holding onto the stocks that we have acquired with the view to acquiring more as and when the market ‘dips’

The influencers are the S&P 500 and whether or not it will correct in a substantial way and the US Dollar and whether or not it too will lose its attractiveness should the Federal Reserve continue with a strategy of fiscal stimuli, via rate cuts and possibly QE as the ECB are now doing.

The 12-Month Gold Chart

The chart below shows that price of gold has now penetrated its 50dma having remained above it for four months as the rally gained some traction. We view this as a negative for gold prices and as we have skin in this game, we would like to see it recover and settle at a level well above the 50dma, which currently stands at $1500/Oz.


On the plus side we can see that the technical indicators such as the RSI has unwound its overbought position along with both the STO and the MACD.

The Gold Bugs Index: The HUI


READ MORE

 

 gold is hanging in there at $1500/Oz plus... better things to come

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