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Gold Loses its Luster

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The Gold and Silver Index (XAU.X) isn't shining quite as brightly as it was 5 days ago. Last week it looked like crude oil was going to $30 a barrel, and gold was starting to become an attractive hedge against inflation worries. This week Crude oil has dropped $3 to $26.74, and gold stocks quickly follow suit.

Gold and Silver Index Daily Chart

After falling from its yearly highs, the Gold Index had been consolidating between its 38.2% and 50% retracement brackets. On 6/14, XAU gave what turned out to be a head fake, and has headed lower since. Today the index has gapped below the 50-dma, and previous support at 56.41. 54 looks to be the next support level. While lower crude oil prices and reduced inflation fears may be good for the economy, it's not good if you are long Barrick Gold

Barrick Gold Daily Chart

Premier Markets profiled a long play in Barrick Gold back on 6/12, and liked it even more when it traded above $17.51. The inability of ABX to follow through had us concerned, but when the stock closed below the 50-dma and oil prices continued to fall, we decided it was time to raise our stop to $16.30. Our stop was hit today, so we will be dropping coverage of Barrick Gold.

Jeffrey Canavan
Assistant Analyst

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