As of yesterday the Weekly MACD & SlowSTO indicators for the HUI still had not turned up, and were instead still pointing down. Now, who's to know whether gold still has more to the downside? With the G/S Ratio still strongly favoring silver (declining), will gold's price soon follow silver to the upside? Or, will silver pull back to a greater extent than gold, reversing the G/S Ratio to an uptrend? This occurrence would likely drop the HUI to its next support level at 260 and test its 200-dma before reversing and igniting the next bull run in gold stocks. As much as I don't like it, this last scenario I see as the most probable, and would seemingly, by the chart, take us into early summer before its safe for us to move our precious savings back into the speculative metals stocks.
Which brings us to the chart at hand of the Ratio of the Natural Gas and Gold Mining Stocks. Don't be bewildered over the maze of the twists, curves and plots. The Ratio itself is identified as a yellow dotted line with its attending scale on the right axis. As of Friday, that dotted line ended at 1.32. The purple bars in the middle of the chart represent the MACD. The meandering purple trend line with its closely allied red line represent the smoothed-out performance of that MACD. The purple line is poised to cross over the red. The Slow Stochastics indicator appears as a brilliant green which is also poised to cross over its mate, a light red trend line. Now, then to see why I'm now turning bullish on energy (natgas & oil moves are nearly synchronous), view the Weekly MACD bars on the XNG. Natural gas is going to do what it wants to - go up - regardless of what gold stocks do! I think the natural gas price low of $6.47 seen last week is a price we will never see again.
What will set it off and running, we don't know, and don't waste our diminishing brain sustenance trying to figure it out; the reason(s) will become evident after the fact. You'll be able to get all the hype and dishonest spin on CNBC, so don't fret. The XNG/HUI Ratio that we see in our chart is saying that the ratio is turning up - meaning the price of the HUI in XNG terms is going down. We'll be getting more gold stocks for our "XNG dollars".
How high will the ratio go? I don't know. There is some resistance at 1.37, but blue sky after that until 1.91. A big disparity, I agree; but tell me in all honesty, how many of you gold bugs rode the gold index all the way down from its 2003 high to the fall of '04 and then down until May of 2005? Most of you, I'll bet. If another such occurrence should be upon you would you do it again, or rather have a vehicle to get you through a swooning dollar until gold stocks are poised for a resurrection? Keep your core gold positions by all means. You never know when we'll get the long-awaited financial derivatives blowup, or a worldwide flight from the dollar. Having gold is like a child with his security blanket; he always has it with him.
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