Monday, July 20, 2009

Gold Stocks Weakening...Ominous Sign for Bullion?

Breakfast was easy this morning, as I continue to wipe plenty of egg off my face from my recent deflationary call on the markets.

I moved my wife's 401K stash from gold stocks into pure cash, as I thought gold was looking toppy and not acting well. Since that time, gold fell a bit, and has since rallied. This morning I saw gold over $950, and thought I'd better recheck my hypothesis.

While gold itself has held up alright over the last month, gold stocks have not - while always leveraged on the price of the metal itself, they've seem to especially be leading the way down over the past month.

In the spring, gold stocks lead the way UP...they now appear like they could be leading the way DOWN.

Gold stocks (red) seem to be leading gold (blue) on the way down.

The next few weeks will be interesting, as the stock market rally appears to be weakening, at least from a technical standpoint (we're overbought here in the short-term). Let's see what happens to gold, and we'll find out if gold stocks have foretold the future, or are merely sounding a false alarm.

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