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Let's go over a complete analysis of the precious metals sectors, gold, silver, US Dollar, gold stocks, and an interesting little gold stock (GSML)
An interesting small gold stock - GSML
Generally when gold stocks breakout, the large caps go first, followed by the mid caps, and then finally the small caps. GSML is a small gold stock that looks intriguing technically.
GSML broke out of a nice base with positive divergence in late August on huge volume. It is currently consolidating and forming into a bullish flag pattern and looks ready to make another move up. Current resistance is at 0.23 cents.
The 1st major price target after 0.23 cents is taken out would be 0.42 cents, which is almost a double!
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Now let's cover the precious metals market, stating with gold. The first chart is a weekly long term chart weekly chart of gold.
This chart is MUST KEEP and one to put in your memory. Notice how well the 65 week is extremely important and well it has acted as major support. Therefore, it's as simple as this guys, gold remains in a bull market as long as gold remains above the 65 week MA. Gold bounced off the 65 week MA mega support back in August.
Secondly, gold is consolidating near support/resistance at 730. When gold moves up, it doesn't have resistance until the all time high at 850!
The second chart is a long term chart of gold; you can see that the $730 level is an important level, but the next major level is obviously the all time high at $850.
The third chart is a daily chart of gold metal. Major support is at $700, therefore if gold pulls back in to this level, that would be a very low risk place to buy gold on a pullback.
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It pays to keep an eye on what the COT 'commercial traders' are doing when trading gold. The commercial traders tend to be net short below 100K at major bottoms and over 160K near tops.
The current commercial net short on gold is currently 175K, therefore this tells us that gold is getting a little toppy in the short term.
This goes along well with the gold charts above; remember gold could pullback to test major support at $700, which would be a major low risk area to buy gold. The current commercial net short of 175K tells us that we might get that pullback soon, which will only set up a buying opportunity.
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Next, let's take a look at Silver:
As you can see, Silver has broken major resistance over the downtrend line! This broken trendline is now support.
The second chart is a weekly chart of gold; major resistance is still at $15.
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Next, let's take a look at the US Dollar:
Gold and the US Dollar are inversely correlated to one another.
The US Dollar has been making new lows, as we all know, which has been bullish for gold.
However, gold is getting a little oversold in the short term, therefore a bounce in the Dollar could cause a slight pullback in gold; which would give us the pullback needed in gold to set up great buying opportunities.
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Next, let's take a look at Gold Stocks:
The HUI Index is a composite of gold/silver stocks.
The first chart is a weekly chart of the HUI; as you can see the HUI has broken a weekly trendline resistance! This broken trendline is now MAJOR support.
The best thing we can hope for now is a little consolidation in order to setup a great buying opportunity and a base for gold stocks to blast off from. Also, see the HUI/Gold ratio at the top, we still need to see a break of that trendline in order to give us a major buy signal. So in other words, ' we ain't seen nothing yet'! Since we don't have a major buy signal via the HUI/Gold ratio.
The second chart is a daily chart of the HUI; it's had a major rally since August, but is overextended in the short term. The best thing to happen would be a pullback to test major support just above $370.
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The HUI/Gold ratio has worked extremely well at producing major buy/sell signals for gold and precious metal stocks since 2001. Major buy/sell signals are produced via simple trendline breaks.
The great thing is that we still do not have a MAJOR buy signal for gold stocks yet as the ratio has not yet broken the current trendline over the ratio! The best thing we could hope for is for the ratio to consolidate here for a little while before breaking the trendline to give a major buy signal.
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