Gold miners threaten breakout

The Gold Bugs Index, representing unhedged gold miners, threatens to break through resistance at 600 which would signal an advance to 700*. Upward breakout would negate the earlier bear signal from penetration of the rising trendline — as well as strengthening prospects of a further advance in the spot price.

Gold Bugs Index

* Target calculation: 600 + ( 600 – 500 ) = 700

Spot gold has so far respected the secondary trendline and support at $1750. Short retracement from resistance at $1850 would be a bullish sign, suggesting an upward breakout. Recovery above $1900 would test $2000, though the calculated target is even higher*.

Spot Gold

* Target calculation: 1900 + ( 1900 – 1750 ) = 2050

Upside potential for gold remains strong. Treasury and the Fed are running out of options to revive the economy and further quantitative easing grows ever more inviting despite the inflationary outcome. With presidential elections looming in 2012, the White House will also be doing their best to influence the Fed decision.

6 Replies to “Gold miners threaten breakout”

  1. I am not so sure about a further bout of QE on 21 Sept – noting the ISM report the Fed may be inclined to wait until Oct to see how things pan out.

    Re gold – I hope you are wrong – my assessment is that gold may be puttiing in a top in W2 and will commence the next downswing in W3 once the US$ starts to rally in earnest.


    1. Not so sure about the USD rallying. I agree that QE at next FOMC is not definite, but cannot be ruled out. A lot can happen in 3 weeks — another (stock) market fall for instance.

  2. Hi Colin,
    Thanks for your all your input in your newletter Colin.
    There is an error in your *calculated target for gold in your Trading Diary. It is a repeat of the HUI *calculated target. Can you please repost your *calculated target for gold. Thanks

    Graham, what makes you think the US$ is going to rally in earnest?

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