Gold Sector in a Post-Bubble Environment
Bob Hoye
Institutional Advisors
July 14, 2008
We should be very close to the period where gold stages its next significant rally. The secular model, continued weak US Dollar, seasonality and COT data support this conclusion.
Secular
In the past eighty years there have been three secular bull markets in
North American equities. The gold sector declines during these periods, then
puts in an important low as the secular bull market crests (1929, 1966 &
2000), continues to rally through the post bubble high seven years later
(1937, 1973 & 2007) and then extends again as other sectors give up ground
in the eighth year (blue shading on charts).
Gold vs US Dollar
The US Dollar continues to stair-step its way lower. Since 2002, each rally
that crossed above the 20-week exponential moving average (or conversely
when the Euro crossed under its ema) has offered an attractive entry point
in gold and related mining stocks. Support in the XAU and HUI is evident
around the 20-week Bollinger Band during these corrections.
Seasonality
In recent years July has offered buying opportunities for a rally into the
September- October time frame.
COT
The GoldWorks COT model monitors the commitment of trader's data (provided by the CFTC) for extremes in the movement of positions of commercial and non-commercial traders. The latest signal from the model was a buy during the week of May 16th when commitments dropped to their lowest levels in eight months. The indicators have since been in a neutral position.
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