1-12-2006 (C) 2006 William Schmidt, Ph.D.
Here we look at 2 gold stocks - GOLD and NEM. Many others exist,
but only these are considered.
We also must view two equivalent measures of the price of gold itself - IAU and GLD
And then consider two other gold plays: IShares South Africa - EZA
and CEF - a Canadian stash of gold in a vault.
EZA is my choice.
Gold stocks often go up faster than the price of the metal. Thus, we see below
that GOLD (Rangold Resources Ltd) and NEM (Newmont Mining) have risen
significantly in the last few months. NEM is up 46% above its September
lows. The metal gold - best represented with IAU or GLD, which track the price
of gold and may be invested in, is up about 26%. Gold mining stock profits vary
depending, in large part, upon how much the hedging the mining companies do in selling their
production. This is hard to know. Instead, Tiger users have come to rely upon
measures of internal strength - like the Accumulation Index, which registers
more patient buying on weakness, and OBV, which measures aggressive buying power.
Viewed purely technically, Tiger faults NEM (second chart below) because while it shows
aggressive buying aplenty, it shows meager recents amount of Blue Tiger Accumulation Index.
For the last year, its AI/200 score is only 58. Only 58 of the last 200 days show positive
readings from the Accum. Index.
I would prefer - on a technical basis - buying EZA - the IShares for South Africa, where the world's
biggest gold mines are. Its AI/200 score is 164. The current levels of Accumulation are rising
again and above the black 21-day ma of Accumulation. I would think any retreat to 105 will
bring in buyers again and turn the stock back up.
There are lots of reasons for owning gold stocks now. Here is a good link. Google "Gold Stocks"
for lots more information to process.
