Today I'm going to show a very long-term perspective of how gold stocks are doing. This will give you an idea of how healthy the gold bull market is, and perhaps give some insights into what is likely to occur in the future.
I'm going to post a monthly chart of the XAU. The excellent website, StockCharts.com, allows users to graph charts on many different time frames, including 1 min, 5 min, 10 min, 15 min, 30 min, hourly, daily, weekly, and, finally, monthly.
With so many time frames to look at, it does sometimes get complicated, but one thing to remember is that the longer the time frame, the more dominance it has, which is why the following chart is so important.
The above chart, which goes back to 1990, is of the XAU, the gold stocks index. This chart puts the gold bull in perspective. Some analysts say that gold prices have gone too far, and that the commodities boom is in some sort of bubble. However, if you look at the above chart, I think it is apparent that the bull market has been very orderly, and that this is not a speculative frenzy. In fact, gold stocks are lower than they were 10 years ago.
The point is, I believe by using the above perspective, the bull market in gold stocks has only begun, and has plenty of room to run. If this were baseball, we would only be in the second inning or so.
However, the main reason I posted this chart is to show the bull flag that has formed. A bull flag forms after a lengthy run up. The flag itself marks a time where the bulls take a breather, before they begin their second assault on the bears. I should also mention that the above chart was taken from my public chart list, and I have not altered it since mid June.
Traditional technical analysis dictates that once the flag has been broken, the length of the subsequent rise should be about equal to the pole. As you can see, the XAU has rocketed through this flag, and now a conservative target would be approximately 35% higher than current levels.
If you have any questions or criticisms, please send me an email. Thanks for looking.