Article written by Prieur du Plessis, editor of the Investment Postcards from Cape Town blog.

I published a post a week ago, posing the question “Gold bullion – is a cycle low imminent?” I concluded the post as follows: “Although it is difficult to pinpoint short-term bottoms, I am of the opinion that the gold bull market remains intact, especially with inflation blowing up all around the world. Meanwhile, China and a number of other Asian countries keep adding gold to their reserves. These purchases should provide a floor to price declines – an “Asian put” so to speak.” Gold bullion was $1,335 at the time of writing and has since moved up to $1,349.

Gold shares recorded a so-called upward dynamic on Thursday, underpinning the view that the pullback from the December high has been a normal downwards reaction within a bull trend.

John Murphy of on Friday said: “My Tuesday message showed the Market Vectors Gold Miners ETF (GDX) testing long-term support at its 200-day moving average, and suggested watching it closely for signs of an upturn. Today’s strong rally in precious metals assets may be the start of that upturn. The chart below shows the GDX surging more than 2% today and clearing its 20-day moving average (green line) for the first time this year. In addition, its 14-day RSI line (top of chart) has turned back up. The daily MACD histogram (below chart) has also turned positive (see circle) for the first time in two months. In my view, these signs of improvement increase the odds that the pullback in precious metal stocks is over. Gold and silver stocks are rallying on the backs of their respective commodities.”


Separately, Adam Hewison ( also provided a brief video analysis on the technical outlook for gold. When the video was produced earlier in the week he argued that a buy signal had not yet been given, but this has just happened by means of a daily trade triangle signal and a pop to the upside appears likely. Click here to access the presentation.

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Gold stocks reverse downtrend was first posted on February 6, 2011 at 8:10 am.
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