Gold Sector Update

While gold vs. the S&P 500 has not done much yet, I want to show a view of gold vs. a couple market leaders, the Russell 2000 and Biotech index, looking constructive.

This is cherry picking sure, but we review enough negative things and since the gold sector is the one that could be a good contrarian play (the conventional investment world hates ’em) going forward, we will scout for positives as well.

Au-RUT and Au-BTK have each climbed above the SMA 50 and are testing that area now.

au.rut

au.btk

Similarly, the 10 vs. 2 year yield spread continued its hold above the 50 day moving averages as of yesterday.

10.2

Here is the real time view showing nominal yields down and the curve slightly elevated again this morning.  Yield spreads are continuing to show a potential bullish signal for the gold sector.

yields

The weekly chart shows that 10-2 still has work to do, but it remains in a potential upturn.

10.2.wk

HUI is back at key short-term resistance (again).

hui

HUI is still technically on the ‘anti-USD’ bounce (along with some commodities) that began when USD started to correct in early March.  So we remain in ‘bounce only’ mode because an anti-USD stance is not a fundamental underpinning for the gold sector.  At least not in our favored scenario, which is the ‘economic contraction’ model for lack of a better way to describe it (off the top of my head).

But if fundamentals like gold vs. stock markets, continued/resumed deceleration in economic data and a rise in yield spreads continue to improve, we will become ever more serious on this sector.  If HUI gets above 211 and closes there for one or two weeks, we will be on ‘new bull market’ alert.