Thursday, May 1, 2008

Jr. Golds Relative to Bullion

Below is a chart of the ratio between the Venture Exchange (CDNX) and the price of gold (GLD). The CDNX is considered a proxy for Jr. Mining shares, and its movement the past 2 years illistrates why the miners, especially the Jr. miners have grossly underperformed against the price of gold.
A consolidation out of a nasty downtrend may be in the works. Its perhaps too early to tell but Im watching this ratio closely. When the Jr. miners regain some strength, it could be a signal that the ratio is about to turn in favour of the miners over the metal.

This chart shows a number of "fakeouts", hence why I believe this is just a seedling of a possible breakout. Notice the parallel downtrend line that has been broken to the upside with the RSI-7 confirming increased strength. The 50 MA has turned from down to flat and the ratio is above the 50 hoping to breach the 200 MA in the next few weeks.


Comments or feedback are welcome as always.



J


2 comments:

Bruce said...

J.

I have been following several Jr. Gold. I presume that the play is to look for companies that have prospects to be acquired by the majors. The ones which I thought had good prospects seem only to go down. Any suggestions on what metricks to use in selecting Jrs. Thanks for the blog.

Bruce.

J said...

you can check out www.billcara.com,
the daily discourse is populated with some smart JR gold investors who share their insights.

J