New Buy Signal for Gold

By Sy Harding
Sy Harding's Street Smart Report

       Our indicators triggered a new buy signal for the gold sector as of the close on May 24.
       Gold, in response to the Fed's announcement after its March FOMC meeting, reversed viciously to the downside along with the stock market and bonds, triggering an unexpected sell signal on March 22. Gold turned south at no apparent resistance level, but in response to fears created by the FOMC announcement, that rising inflation would force the Fed to be more aggressive in raising interest rates.
       Our downside target for the unexpected sell signal was to gold's 30-week m.a., with a possibility it might break below the m.a. As of the last issue it had halted its decline at the m.a., and attempted to rally.
       However, our indicators remained on the sell signal, and gold subsequently dropped significantly below the m.a., as it did in 2003, and 2004.
       So far, gold bullion has actually fallen another 1% since our buy signal. But gold mining stocks and mutual funds, where we concentrate our gold holdings on buy signals, have gained about 5%.

XAU Index of Mining Stocks

       At the March 22 sell signal, the XAU's 21-day moving average was expected to be overhead resistance.
       Each of its subsequent attempts to rally were stopped at that resistance. As the consensus of the 35 indicators we follow became oversold, we said to become bullish, we would need to see at least the quickest of the intermediate term indicators turn positive, and on the short-term charts at least a buy signal on short-term MACD, and a break up by the XAU through its 21-day m.a.
       We did get that on May 24. We have 'penciled in' today's additional gain (as of mid-day anyway), just to show you So far, gold bullion has actually fallen another 1% since our buy signal. But gold mining stocks and mutual funds, where we concentrate our gold holdings on buy signals, have gained about 5%, (as of mid-day today). that the rally is liable to become choppy now as the XAU won't get too far extended above the m.a. before it pauses to wait for the m.a. to catch up.
       Our Non-Seasonal Market-Timing Portfolio is currently 70% invested for the downside, in keeping with our sell signal on the stock market, and 30% invested in the gold sector in keeping with our recent gold buy signal.
       Editor's Note: Sy Harding is ranked as the #1 Gold Timer for the last 12 months, May 2004 - May 2005, as rated by the Timer Digest. Mr. Harding is editor of Street Smart Report, 505 East New York Ave., Ste. 2, DeLand, FL 32724, 1 year, 17 issues, 4225