Sunday, April 27, 2008

Canadian Gold Miners (XGD) TA update

Here is an updated 1 year chart for the XGD, Canadian Gold Miner's ETF. My chart from last Wednesday posed the question of a plunge in the making. The XGD is sitting at deeply oversold levels for the RSI, STO and MACD. A bounce next week could mark the start of a new upleg, or a fake out as the price of gold corrects towards its 200 MA at the low 800- high 700 level. The XGD is at a multi-year low relative to the price of gold. It seems the miners get hammered as more bad news develops for the POG yet other equities rise as news of write downs, losses and foreclosures mount. As oil breaks record highs the headlines claim costs of mining are rising too fast, hurting the sector, yet on pulls back in oil the same headlines claim the commodity bubble bursting and calls for gold/gold shares to fall in sympathy.

For investors in the gold mining shares its been over 2 years of under performance to the POG. At what point do mining shares become so cheap relative to gold that value investors begin to notice? There would be no point in ever investing in mining if the metal itself were a better investment, who would take the added risks of investing in mines?

Jim Sincliar has called for a resolution to the downdraft in gold and the shares by early May 2008. For now the TA is my guide.


I own shares in the XGD, this is not investment advice, and I am not an investment professional or advisor and have no affiliation with or have received remuneration from the custodian of the XGD ETF.

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