Thursday, December 8, 2011

Gold Miners Quietly Perking Up: AUY, DROOY, GLD, RGLD

Gold has been quietly consolidating for several months following a surge to all-time highs. While the initial pullback was violent and well publicized, gold has been much quieter in recent months. The, metal as represented by the SPDR Gold Trust (NYSE:GLD) ETF, is currently forming a large triangle, as its trading range continues to narrow considerably. GLD swung from $185 per share to under $155 in just a few weeks in September, whereas it has been confined to a $5 range the past few days as the triangle comes to a climax. GLD has also been oscillating between a key horizontal price level near $165. This would be a key area to watch in the next few days, as a drop under this level could imply a retest of the September lows. However, any strength from this area could imply that the correction in GLD may be coming to an end.

One group to watch in the case of strength in gold is, of course, the gold miners. Several miners have been perking up recently and may get a boost from strength in the metal. DRDGOLD Limited (Nasdaq:DROOY), for instance, surged in October and has since been trading in a bull flag pattern. Volume has been tapering off throughout the consolidation, which is a healthy sign. DROOY would be worth watching on any strength that carried it over the trendline that is marking the outer confines of the bull flag.

Royal Gold, Inc. (Nasdaq:RGLD) is another gold miner that may be close to a breakout. While it is not as strong in the short term as DROOY, RGLD is sitting just under all-time highs after a several-month-long consolidation. This stock is certainly volatile, so traders should take that into account, but any strength that carries it above $82.50 could signal an important breakout. (For more, see How Gold Performed In 2011.)

Yamana Gold, Inc. (NYSE:AUY) is another gold miner that is near the top of a recent consolidation. It has been trading between $17 and $13 since August, as it builds a base. AUY may need some more time before it can sustain a breakout, but the $17 level is certainly worth monitoring. Any close above this level could signal the next trend move higher.

The Bottom Line
Gold has really been out of the limelight for a few months after a much-publicized rally. Talk of a bubble has subsided and gold is really not that far off its all-time highs. While it may not head directly back to test its recent highs, there is a chance that the metal can gain some momentum. Gold mining stocks have typically followed the metal higher and are showing signs of strength, so it is very possible that this group catches a bid soon. If this is the case, then traders certainly don’t want to be late to the party.

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