Golden Weekly Review 09 02 2011

Golden Fortunes
Sept 02, 2011

This past week was very bullish for the the precious metals and the gold mining companies.  The TTGD - S&P/TSX Global Gold index had a strong close to the week, especially after having put in a all time high on Friday and closing at 437.   We mentioned a few weeks ago that the index would need to test 420 first and then the all time highs of 435 back in Dec 2010. Once we broke above 435 and held it there for a couple of days, the mining shares are going to move much higher in price.  We next week will be show me time for the gold mining sector, as it need to continue moving higher with strong volume in order to confirm this breakout.  If the gold mining shares and the TTGD index continues to rise next week, The Golden Train is about to leave the station with the GOLD MAN on board and will soon accelerate to higher highs as it rushes toward the next train stop.... [Loud]  "All Aboard"  

If you haven't bought your ticket on the Golden Train, its still not too late.  I would suggest buying some physical gold, silver and some gold mining shares early next week before they start getting accelerating to the upside.  If your invested in the financials, you may want to consider selling some time next week and go long the gold sector.  The financials will under-perform over the next 3 months as the European Crisis continues to unfold.  This is not the time to be invested in Financials unless you want to lose more of your wealth, there will be better opportunities in the future to buy back into the right financial sector at much cheaper multiples.

The mining companies are going to be the biggest benefactor of rising gold prices over the next few years.   They are currently being valued as if gold was priced at several hundred dollars lower than current prices. As gold continues to maintain these price levels and possibly go much higher over the next few years, the mining companies valuations will generally follow the gold trend higher.  During the past 10 years, the gold mining companies in general  have been following the trend higher in gold, however at certain times the miners valuations and stock price do go in and out of favor and thus out of sync with golds price movement.   Evaluating the mining companies is much more difficult than predicting the price of gold, there are many more factors that affect the share price of gold miners and explorers, some thing we will followup with in a Special Golden Report coming in the near future.  Over the last few years, the miners valuation never reflected the gold price over the same period of time, they moved from undervalued to fair value but never got to extremely over valued.  Even today, they are considered way under-valued by many experts and analysts that follow the precious metals and mining industry, however we believe that is all about to change and the mining shares will soon see fair value for the product they produce, especially now that the GOLD MAN wants Gold.

Looking at the chart below, we are very close to confirming a major breakout in the gold mining shares. The TTGD- S&P/TSX Global Gold Index is one of a few indexes that we follow which tracks the performance of gold mining companies. There is also the HUI and XAU gold indexes, which also have similar patterns of breaking-out much like the TTGD index chart below.  On Friday Sept 2, 2011, the index closed the trading day at 437 which is now at all time highs and is now sitting well above the 6 month overhead resistance line at 420 outlined below.  If the index maintains the new higher price over the next week, we believe that the index will start trading in a new higher trading range and could very quickly start moving higher towards the top of the new intermediate trading range.  Notice over the last six months, the TTGD index was in a sideways trading range between 350 and 420, that is a 70 point spread between the top and bottom.   Any good technical analysts knows that once Overhead Resistance Line ORL gets taking out and holds it, then overhead now becomes support, so 420 on the TTGD index will now act as support.  I would suggest adding gold shares to your portfolio very soon before the GOLDEN TRAIN leaves the station and the various gold indexes continue to make higher highs. 

How high will the TTGD go over the next few months is anyone's guess.  There are so many fundamental factors for pricing gold mining shares to determine what higher valuation they will receive in the future.  This is something we will discuss in future articles about the gold mining sector in general. But for now, feel comfortable in knowing that the whole gold mining sector is getting a lift with the rising gold price and once this breakout is fully confirmed next week, the Golden Train will have really left the station and you will be chasing it down the tracks as it powers ahead to the next stop.  Feel free to read our commentary and analysis work on the various gold mining and exploration companies the we have researched and currently hold in our Golden Fortunes Portfolio.  The most recent Golden Trade Alerts are listed below providing commentary on some of the individual securities covered.  Click on the individual securities below for company specific analysis.