Looking at Gold Through Another Lens -Part 1

For this past week, gold bullion rose by $37.70 or 4.79%, and gold stocks, as expressed by GDX, increased by 4.05%. There were some unusual developments this week as well. For example, the US Dollar and the Canadian Dollar fell simultaneously, which very rarely happens. Also the TSX ended lower for the week despite a bounce back in commodity prices.

The fact that the Canadian dollar fell while gold rose finally gave some relief to Canadian holders of precious metals, which brings us to the first chart. The following chart shows the price of gold denominated in Canadian Dollars on the top, and Canadian gold stocks on the bottom:


It seems that very few technical analysts look at the price of gold in Canadian dollar terms. This is unfortunate, since most of the companies inside the major gold indexes are Canadian. If you look at some of the companies inside GDX, you will find names such as Barrick Gold, GoldCorp, Kinross, Agnico Eagle, and Yamana, and these are all headquartered in Canada.

This means that these company's profitability will be directly affected by gold's price in Canadian dollars. Anyway, if you examine the above chart, you will notice that Canadian gold is at what could potentially be triple top resistance.

This resistance is also round number resistance. This is because the resistance area has formed where Canadian gold has reached the $800.00 mark. Looking at it another way, gold in Canadian Dollar terms is at the same level that it was back in May 2006.

If Canadian gold fails at this level, it will have ramifications for both Canadian and American gold investments.