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Gold/Silver Index breaking new highs

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With little sign of inflation showing up in the economic data, it's perplexing for many on just why gold stocks continue to outperform the broader market averages and various sectors. The simple explanation would be "more buyers than sellers." As many subscribers know, I'm a "supply/demand" type of trader/investor so the buyer/seller (demand/supply) explanation has always made some sense to me.

Gold/Silver Index Chart - Daily Interval

I've gotten tired of trying to figure out why the gold/silver stocks continue to perform. I've read numerous research reports, all of which make some sense, but also seem to have some flaws. The most simple and logical explanation has been that there are more buyers than sellers and money is flowing to the group. Near-term bullish target looks to be the $75-$76 level and MACD just turned higher about a week ago. Has been a good group to trade and has been an area where short-squeezes take place. Lots of shorts in this group that tend to turn with the trend once a new high gets broken to the upside.

April Gold Futures (gc02j) - Daily Interval

While the Gold/Silver Index (XAU.X) breaks to a new 52-week high today, the April Gold futures (gc02j) are just starting to make way above their 61.8% retracement and have yet to challenge their 52-week contract high of $309.40/oz. For those trading some gold stocks bullish, I'd set a "downside alert" under the April futures contract at $295. With MACD just turning higher from below the zero level, this futures contract also looks higher. In recent months, I've noticed that the futures market seems to lag the movement in stocks.

Jeff Bailey
Senior Market Technician
Option Investor

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