Historic Move in Gold Stocks Is Directly Ahead

By Jordan Roy-Byrne Jul 25, 2011 3:00 pm

Gold stocks are ready for a massive, potentially historic breakout at a time when the sector is underowned, undervalued, and a tiny fraction of the overall market.

A variety of factors are lining up that lead my firm to believe we are on the cusp of a major move higher in the gold stocks. We've been saying this for a while, but the reality is we are moving closer and closer to that moment. The fundamentals couldn’t be more obvious and being in the 11th year of a bull market means the timing is ripe. We think you will find the facts and conclusions extracted from the technicals, sentiment, and valuations very compelling.

First let's look at the technical aspect with the Barron's Gold Mining Index. Gold Stocks basically consolidated from about 1937 to 1961. The breakout really began in 1964. The consolidation ranged from about 17 to 50. The breakout took the market from 50 to about 220 and in only four years. Today we are on the cusp of a similar breakout. The market made a marginal high in 2008 and another marginal high earlier this year. A sustained move to new highs will qualify as a major multi-decade breakout. 

Dollar Falls to Record Low, Stocks Slide

By Stephen Kirkland and Nikolaj Gammeltoft - Jul 26, 2011 4:46 PM ET
The dollar slid to a record low versus the Swiss franc, stocks fell and the cost of insuring U.S. debt rose to a 17-month high as Democrats and Republicans continued to wrangle over competing plans to cut the deficit.
The dollar depreciated against all 16 major peers at 4 p.m. in New York and earlier dipped below 80 centimes versus the franc. The Standard & Poor’s 500 Index lost 0.4 percent to 1,331.94 and the Stoxx Europe 600 Index closed down 0.4 percent. Credit-default swaps on U.S. debt increased two basis point to 58 basis points. The S&P GSCI Index of 24 commodities climbed 0.6 percent, rebounding from a 0.7 percent drop, as zinc, cotton and copper added at least 1.7 percent.
The Obama administration threatened a presidential veto of House Speaker John Boehner’s two-step plan to raise the U.S. debt ceiling and cut $3 trillion in government spending. Stocks were also pressured after home prices fell the most in 18 months, 3M Co. (MMM) forecast earnings that trailed analyst estimates and United Parcel Service Inc. said the third quarter will be “fairly slow.”