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Will Gold and Silver Stocks Follow the General Stock Market?

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The outlook for juniors and silver stocks looks quite favorable relative to gold stocks based on Thursday's and Friday's closing prices.

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The silver / USD coefficient for the last 10 days is a bit more negative than not. If this tendency remains in place, the correlations that are more important (30-day column in this case) will change as well. Simply put, the implications this week are more bullish than not and much more bullish overall for the precious metals sector than they have been in recent weeks, because last week we saw at least some signs of the return of the negative correlation between the USD Index and the precious metals market. The same thing can be said about correlation coefficients relating to gold and S&P 500 and silver and S&P 500, hence the above S&P 500 analysis bodes well for precious metals. As far as correlation between the general stock market and precious metals junior (NYSEARCA:GDXJ) and senior (INDEXNYSEGIS:HUI) mining stocks is concerned, mild positive correlation is seen only in the medium and (very) long term. The values for the short term may change in the near future, however, just as with correlations between precious metals, the general stock market, and currencies.

Now let us move on to precious metals stocks and see whether the outlook here is as bullish as in the general stock market. We'll start with an index that is a good proxy for junior mining stocks, as so many of them are included in it.



In the Toronto Stock Exchange Venture Index, we see that the juniors held up very well last week. From the very long-term perspective, no decline is seen at all. Once more strength is seen here, the juniors will likely break above the resistance line and then catch up with other stocks.

Let's move on to silver senior mining stocks. This time we'll use an ETF – Global X Silver Miners ETF (NYSEARCA:SIL) – as a proxy for the whole sector.


Click to enlarge

Silver stocks did not correct more on Thursday than they had rallied on Wednesday. Moreover, the MACD indicator suggests higher prices here in the near future.

All-in-all, the technical short term looks favorable. The silver stocks continue to show strength and we continue to favor them over gold stocks.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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