- Earlier this year, Goldman
Sachs' Peter Oppenheimer said that compared to bonds, US stocks were
the cheapest in 50 years.
- If Peter is correct, that could
be good news for your gold stocks, because there is an ongoing correlation
between the Dow and most gold equities.
- Unfortunately, Goldman also
believes that the fiscal cliff situation could drive stock markets 8%
lower by year-end.
- Please click
here now. You are looking at the daily chart for the Dow, and you
can see that it made a small top in mid-September. It has declined about
8% from the high.
- Gold stocks are more volatile
than the Dow. Please click
here now. GDX declined about 18%, during the period in which the Dow
fell 8%. There is a lot of symmetry between these two charts.
- If the Dow is set to fall
another 8% from the lows of last week, GDX could fall another 18% from
its recent lows. That would put GDX at about $37, and below the May-July
- Some of the largest gold
companies are already trading near their summer lows, which is somewhat
- If you own a home, it is wise to
purchase home insurance. If you own gold stocks, carrying some cash and
short positions is a form of insurance. Please click
here now. That's the daily chart of DUST, which is effectively a
triple-leveraged bet against GDX. The performance is calculated on a
daily basis. I'm a buyer, moderately, in the $28 and $22 areas.
- What would happen to gold
stocks, if Goldman Sachs is correct about the Dow falling another 8%,
and then they called for an even harder fall, instead of a rally?
- The situation could get quite
ugly. A small position in DUST may help gold stocks investors to
professionally manage fiscal cliff fear.
- Gold recently sold off along
with the other so-called "risk on" markets, but it
bottomed quickly. The daily chart shows a nice head and shoulders bottom
pattern in play.
- Please click
here now. The daily gold chart looks superb. The H & S pattern
sits near the demand line of a beautiful rising channel.
- HSR (horizontal support &
resistance) at $1758 is the initial upside target, and then $1800. A
"price pop" to the $1825 price zone could be a game
changer for gold stocks.
- Silver looks even better than gold. Please click
here now. Yesterday's price action was important, because it took
silver above the neckline of a head and shoulders bottom.
- At this point in time, gold has
yet to rise above its neckline, so silver is clearly the leader.
- Silver seems eager to race to
$35.50, and if gold can rise above $1800, that could catapult silver
into the $40 range.
- There's more good news. Ben
Bernanke makes a speech in New York today, and he may give more hints
about ramping up QE3. Currently, QE3 is being "diluted",
because the Fed is selling short term Treasuries.
- There are rumours
that the Fed may cut back on that practice, or even halt it, before the
end of the year. If "Big Ben" speaks boldly about
ending the dilution of QE3, gold and silver could spike higher, very
- Most investors in the gold
community like speculative resource stocks. If you are looking for
action, my favourite play right now is the
"Global X Gold Explorers" fund.
- To view the current price chart,
- At about $8 a share, the GLDX
ETF is something that is probably priced "just right",
for action-oriented investors. In contrast, GDXJ is trading at about
- It's a lot easier to look down
from $8, than it is from $22. Aggressive investors should considering
accumulating GLDX on every 25 cent decline, inside the highlighted $7-$9.75
- I like both GDXJ and GLDX, but
there's no question that GLDX is a lot easier to handle, emotionally.
- A move above $1800 in gold could
be the catalyst that takes GLDX above $10. From there, the target would
be $13, which is about 50% higher than today's price!
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