Another Look At Gold

By: Prudent Speculation Monday, October 12, 2009 3:48 PM

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I thought it might be interesting to have a look at one of the leaders of the bull run in gold. Royal Gold ( RGLD) has been an absolute standout in this regard. the 10year weekly view (chart above) illustrates the same negative divergence or non-confirmation exhibited by the GDX and HUI which I noted previously in my post Gold and the Buck with the charts in Ooops.... Forgot the Charts.

RGLD needs to take out $50 convincingly on VOLUME. It is one of the clear leaders in the sector and as such needs to lead not lag. If I one takes a step back from the excitement of the buffett table and starts to add up the clues, clues such as:

Negative divergence of the stocks to the bullion
Very high bullish sentiment numbers on bullion
Very low bullish sentiment numbers on the U.S. dollar
Articles like Demise of the Dollar and Dollar Reaches Breaking Point.

One might be inclined to be a tad cautious. I know the gold bulls will consider this anathema, pure heresy as they believe gold is going to 3, 4, or 5,000/oz. I have a hard time refuting that argument but as long as the above mentioned discrepancies remain I cannot rule out that gold may in fact go to 3, 4 or 5,000/oz...... but may do so via $650 or 750/oz.

Hence my cautiousness on gold.

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