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CDNX and Gold

The CDNX climbed for an 8th consecutive week, hitting a new 52-week week high of 1789 as it continues its march toward a resistance band between 1900 and 2000 that we recently explained in detail.   This is an incredibly powerful market, fueled by good exploration news on many fronts, an historic move in Gold and rising commodity prices in general.

The amazing strength of the CDNX was very much in evidence near the end of the week.  The Index gapped up and hit 1789 in early trading Thursday before a reversal set in as Gold corrected by over $30 an ounce.  The CDNX fell 34 points to 1755 but buyers quickly stepped up to the plate, as they have been doing all along on any kind of a pullback, and the market regained some of those losses before powering ahead 19 points the following day to close the week at 1785.

Over the past 8 weeks the CDNX has jumped 22.5%.  The trend is your friend.  Even though this market is overbought, one must keep the big picture in mind – we’re in the midst of a massive move of historical proportions in junior gold and mining stocks in general – and the CDNX seems determined to test the 1900 to 2000 resistance band (in the immediate vicinity of its 200-week declining moving average) before a pause and a minor short-lived correction are likely to set in.  In many ways this is the reverse of 2008.  By the spring of next year we could easily see the CDNX 50% higher than where it is now.  A lot of money remains on the sidelines, average investors – many of them still smarting from the crash 2 years ago – have not yet caught on to what’s happening in the Gold market and with these junior stocks, and the CDNX still has a lot of catching up to do.  Just three years ago the Venture was trading as high as 3300 with Gold $600 lower than it is now.  When the “Mania Phase” finally kicks in, the hysteria surrounding Gold mining stocks may even surpass that of the “dot com” craze a decade ago.

Gold hit a new all-time high of $1,365.70 last week and closed Friday at $1,347 for a $28 weekly advance.  Gold has climbed exactly $100 an ounce over the last 4 weeks with weekly gains of $28, $22, $27 and $23, respectively.

There are many reasons for the current flight to Gold and why the yellow metal could ultimately exceed $2,000 an ounce, not the least of which is that Gold is being increasingly being viewed as an alternative currency.

Speaking of currencies, the U.S. Dollar continued to get pummeled last week and what we’re really witnessing right now is a growing list of countries (the United States included) that have either recently intervened or are currently trying to force their currencies lower to gain some sort of economic advantage.  It’s impossible to predict all the consequences of this global “race to the bottom” or “currency war” but one of them is very likely much higher Gold prices.

In the coming few weeks we’ll be exploring in greater detail the global macro picture and why it makes so much sense to be hugely bullish on Gold and commodities in general.  As investors we have some incredible opportunities in front of us at the moment.