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Gold Stocks Have Officially Broken Out

By Jeff Clark
Thursday, May 24, 2012

Gold stocks are finally showing some positive price action.
 
The Market Vectors Gold Miners Fund (GDX) is up 8% in the past week. It was higher yesterday even as the broad market declined... And even though gold was down on the day.
 
It appears gold stocks are finally starting to outperform the action in the metal itself.
 
Take a look at this chart comparing the action in GDX to the action in the SPDR Gold Trust – the fund designed to mirror gold's price action...
 
 
 
A falling line on the chart shows gold stocks are lagging the metal. A rising chart would indicate gold stocks were outperforming the action in the metal. As you can see, gold stocks have lagged the metal all year. The underperformance became even more extreme over the past three months.
 
But notice the pattern has finally broken above its recent series of lower highs. Yes, it is just a tiny breakout for now... But it is the first ray of sunshine we've seen in the sector in over a year.
 
The best time to own gold-mining stocks is when the stocks are outperforming the metal.
 
In other words, you want to own gold stocks when this chart is rising. We may have finally turned that corner last week.
 
This doesn't mean you should rush out and pile your entire life's savings into the gold sector. You have to pick your spots. And we still need to see a series of higher highs and higher lows on this chart to confirm the uptrend. But it's a promising start, and it's worth the risk for traders to add some gold exposure to their portfolios.
 
Best regards and good trading,
 
Jeff Clark




Further Reading:

Longtime Growth Stock Wire readers know to listen when Jeff talks gold. Last July, he said gold stocks were ready for a big rally. Two months later, they were up 22%. In August, he saw a sign of trouble ahead for gold. A month later, gold prices were down 10%. And in October, he called it the best gold stock opportunity he's seen in two years. Two weeks later, gold stocks were up 18%.

In The Daily Crux
Market Notes
Greenback is strong... U.S. dollar index breaks out to a 20-month high.
 
Oil prices drop below $90 a barrel for the first time since October.  
 
Gold miners are starting to outperform the market... mining fund GDX jumps 5% over the past week while the S&P 500 falls 2%.  
 
Foreign resource giants are stuck in a downtrend... fresh 52-week lows for BHP Billiton, Petrobras, and Vale.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1318.86 +0.2% +0.1%
Oil (USO) 34.09 -1.1% -11.4%
Gold (GLD) 151.62 -0.3% +2.6%
Silver (SLV) 27.05 -1.1% -21.1%
U.S. Dollar 82.04 +0.5% +8.5%
Euro 1.26 -0.7% -10.3%
Volatility (^VIX) 22.33 -0.7% +22.2%
Gold Stocks (^HUI) 421.78 +4.1% -19.7%
10-Year Yield 1.72 -3.9% -45.1%

World ETFs
Symbol Price
Change
52-Wk
USA (SPY) 132.27 +0.1% +2.3%
S. Africa (EZA) 62.21 -0.4% -5.6%
Japan (EWJ) 8.90 -0.8% -7.9%
Singapore (EWS) 11.79 -1.3% -10.6%
S. Korea (EWY) 52.26 -0.7% -14.5%
Taiwan (EWT) 12.06 -1.4% -16.7%
Canada (EWC) 25.73 +0.9% -17.3%
Lat.America (ILF) 40.04 +0.1% -17.7%
Israel (ISL) 12.42 -1.4% -20.4%
China (FXI) 33.25 -1.1% -21.1%
India (IFN) 18.70 -1.4% -32.4%
Russia (TRF) 13.44 -1.3% -35.3%

Sector ETFs
Symbol Price
Change
52-Wk
Retail (PMR) 24.78 +0.7% +17.8%
Big Tech (QQQQ) 62.56 +0.2% +11.0%
Consumer Svcs (IYC) 78.53 +0.6% +8.9%
Utilities (XLU) 35.52 -0.5% +8.7%
Real Estate (IYR) 61.44 +0.4% +5.8%
Health Care (IYH) 75.37 -0.5% +3.3%
Oil Service (OIH) 37.09 +1.3% +0.0%
Big Pharma (PPH) 36.67 -1.2% +0.0%
Software (PSJ) 25.92 +0.5% -0.9%
Industrials (IYJ) 66.92 +0.6% -2.2%
Construction (PKB) 12.98 +1.1% -2.4%
Financials (IYF) 53.21 +0.3% -4.6%
Biotech (PBE) 21.73 +0.2% -4.9%
Transportation (IYT) 90.67 +1.2% -5.9%
Defense (PPA) 18.56 +0.0% -6.1%
Media (PBS) 14.09 +0.4% -6.2%
Water (PHO) 17.79 +0.5% -6.9%
Insurance (PIC) 15.27 -1.2% -8.0%
Telecom (IYZ) 20.96 +0.0% -13.6%
Basic Mat (IYM) 63.52 +1.2% -15.8%
Semis (PSI) 14.32 -0.4% -18.3%
Nanotech (PXN) 5.98 +0.8% -32.4%
Alt. Energy (PBW) 4.29 +0.7% -52.1%

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