Gold equities and related exchange traded funds listed on the TMX finally came alive on Friday after gold bullion prices rose sharply on news that China's second quarter GDP recorded a healthy 7.6% annual growth rate. Gold advanced to $1,587.10 (U.S.) per ounce and briefly broke above its 20- and 50-day moving averages.
Seasonal influences for gold and gold stocks are starting slightly earlier than usual this year as they did last year. Thackray's 2012 Investor's Guide notes that the period of seasonal strength for the gold equity sector is from July 27 to September 25. The equity sector trade has been profitable in 17 of the past 25 periods including 11 of the past 14 periods. Average gain per period for the past 25 periods was 7.2%.
On the charts, the S&P/TSX Global Gold Index at 289.06 has a negative, but improving technical profile. The Index bottomed in mid-May at 265.59, rose strongly to 340.71 in early June followed by a recent test of its low. The Index remains below its 20-, 50- and 200-day moving averages. Short term momentum indicators are deeply oversold and showing early signs of bottoming. Strength relative to the TSX Composite Index has been positive since mid-May. A move above 340.71 completes a modified reverse head and shoulders pattern. Preferred strategy is to accumulate gold equities and related ETFs at current or lower prices between now and July 27 for a seasonal trade lasting until the end of September. . .View Full Article