THE TREND READER
GOLD COMMENT
GOLD STOCKS ARE PATIENTLY AWAITING THEIR TURN
November 1, 2018
With the US stock indices hitting new highs
a l m o s t d a i l y, w a t c h i n g t h e m e d i o c r e
behaviour of Gold stocks is discouraging at
best. As a result, some investors are
temporarily shifting their attention toward
other, more exciting sectors and stocks while
others have abandoned the area at large.
It should be noted that such long periods of
no action or consolidation are very common in
the Gold Sector. Gold stocks usually make
strong and decisive moves, which require
extended resting periods.
The last time Golds experienced such fast-
paced action was the January-August 2016
period. This tour-de-force rally almost
doubled the XAU index within a period of
seven months. On August 10, 2017, our
Market Comment said: All positions closed. A
major pullback should provide a re-entry
opportunity. Then we warned that the
resting period may take longer than many
anticipate.
Indeed, following the August 2016 highs and
an initial pullback, the Gold sector has spent
the last ten months consolidating and building
a base for the next advance. Since December
2016 Gold stock indices, the XAU and HUI
have settled into well-defined trading ranges.
The market action was limited to an
occasional flare up during which the indices
retested their support and resistance levels.
Although this prolonged consolidation could
be tiring there is growing evidence that Gold
stocks may eventually re-join this bull
market.
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The Gold sector is a late-cycle performer.
There is no question that this eight-year-old
bull market is approaching its expiration date
and, as a result, it is most likely to be
preparing its final act. Gold and Gold stocks
are usually the last to come alive in a long
chain of sector rotation during the bullish
cycle. In fact, we are just observing positive
price action in some large cap Energy names
which go live just before Golds.
Plenty of healthy base-patterns. Many
Gold stocks such as Agnico-Eagle (AEM-T),
Gold Fields (GFI-N), IAMGold (IMG-T) or
Newmont Mining (NEM-N) to name just a few
have built adequate bases to support a
significant move. Having said that, only
breakouts from the current trading ranges
would confirm the start of a rally in the
aforementioned Gold stocks.
Bullish sentiment remains low. With
technology and industrial stocks hitting new
all-time-highs, interest in Gold and Gold
stocks has evaporated and expectations
remain low. Rallies in Gold and Gold stocks
come quickly and unexpectedly. The current
mediocre mood in the sector could provide
the necessary fuel for a prospective rally to
stay alive.
Golds remain in a resting phase, which
has a dual purpose: to eliminate the
excesses of the previous rally and build a
platform for further gains. Investors
should ignore the back-and-forth moves
and instead focus on longer-term
potential.
A breakout from current trading ranges
and base patterns would confirm the
start of the next major up-leg.
Olaf Sztaba
 THE TREND READER

XAU
Weekly chart with the 40-week moving average

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