Justin Smyth

Even though this summer was a sentiment wasteland for the precious metals markets, right now feels like a close second.

As we go through the first significant pullback in the market for 2012, the dollar seems to be at a turning point that should influence market trends for the next few months. Going all the way back to 2002, there has been a strong inverse correlation between stocks and commodities, and the U.S. dollar.

Of the legions of investors who are welcoming a fresh start to the year after the choppy and directionless market of 2011, perhaps gold stock investors are the most eager. Gold stocks had a volatile year last year with no progress made on the upside.

Back in July I wrote an article discussing the fact that the Euro had failed so far to come under pressure during this wave of the European debt crisis. In fact it was still in a technical uptrend since bottoming in 2010 after the first wave of the Euro crisis

This article will use my new skills to compare gold’s current C-wave development with gold’s great parabola that concluded on January 21, 1980, as well as examine the historic relationship of gold with gold mining stocks using both the BGMI (Barron’s Gold Mining Index) and HUI (Amex Gold Bugs Index).

If you simply looked at a chart of the Euro over the last year or so, and didn’t know about all of the problems facing the European Union, you could conclude that the Euro was just experiencing a pullback in an ongoing uptrend.

Gold stocks have had a nice bounce over the past couple weeks and gold investors are likely wondering if this long period of underperformance by the miners is finally drawing to an end.

Gold stocks continued to lose ground last week and have now hit the same level they were at in September 2010. Gold however was marginally higher last week and is still holding above its May 2011 lows.

When investing in the gold sector one of the most frustrating experiences you can have is watching gold outperform the gold stocks in your portfolio.

May was the worst month for the S&P 500 since August 2010, but the percentage loss for the month only ended up being about 1.5%.  The four day rally at the end of May, including the big up day on Tuesday, served to soften some of the damage done in May.  But the market … Continue reading