Gold - Nov 9, 2008

charts courtesy of stockcharts.com

Gold has held better than many things

Better than S&P

Better than Oil

Better than the resource rich Toronto Stock Exchange (TSX)

But not better than paper

A look at weekly chart of GLD makes us wonder where the supposed gold bull is hiding.

This is not a healthy chart. I have read some arguments saying that paper gold is massively manipulated and physical gold is in short supply. If that is true why don’t gold enthusiasts buy future contracts and demand delivery? Some other arguments say that Gold futures trade up nicely over North American nights in Asia, but when Comex sessions start, they gets hammered down. So, why don’t Asian traders open North American accounts and buy cheaper off Comex?

One question we may ask is: if gold is the thing to own, why are gold miners so heavily correcting? Markets are made of opposing opinions and ideas and that’s that. Still, it is hard for me to argue against price and trend.

That being said, GLD seems to be near the end of a corrective wave. I have always believed that in a healthy environment, commodity stocks should lead the commodity on the way up. So we should probably watch the performance of gold miners versus the metal. I also believe that AEM and GG are head and shoulder above many other miners. So, instead of watching performance of GDX or the Gold Bug Index (HUI) index against the metal, I will be watching AEM

One important thing to note is that since the lows of October, S&P has outperformed GLD. That, to me indicates, that performance of GLD leading into the October crash was mainly due to its money status and not because of inflation expectations.

It all may change soon, but till then, all I can do is monitor and trade without regards for the narratives of the day.