Mining for Gold
With Friday’s big move in the shiny yellow stuff, a good deal of noise is being made about the future of the gold sector. Recent price action suggests that this is a rally in a bear market, and we’re approaching overhead resistance. Moreover, the recent rise was substantiated by weak volume, suggesting little conviction amongst buyers. In its favor, the sector made a higher low in the recent wave of selling, which suggests relative strength to the overall market.
Fundamentally, there are many reasons to like Gold and its producers, things like the new Citigroup bailout come to mind. Nevertheless, if the credit crisis persists (read: Paulson’s strong dollar policy), then gold’s luster will remain tarnished. With questionable technicals and murky fundamentals, this is a risky long, and a potential short until further notice.