Wednesday, October 5, 2011

How the recent gold-smackdown happened & 5 Gold Stock Targets

The recent correction technically a necessary thing and healthy and normal for the longer term trend is interesting from the perspective of the event's market mechanics.  Here is a nice and clear view of its prime catalysts.

reposted from:

5 Ways to Play the Gold Miner Spread

BALTIMORE (Stockpickr) -- The old saying goes that "all that glitters isn't gold" -- but lately all that's gold hasn't glittered much either.

Gold prices have made a reasonably strong run in 2011, spurred on by a combination of gold's attractive status as an "alternative currency" and investors' flight to quality from stocks. More recently, however, fear of equities has been the primary driver of appreciation in gold prices. That's something that's been evident from the lock-in-step ascent of both gold and treasuries -- two fundamentally disparate asset classes.

The Fed's Operation Twist smacked down gold prices by making treasuries the comparatively more attractive anti-stock trade, drying up demand for the metal. Now the big question is whether gold has run its course -- or whether investors have a major buying opportunity for the yellow stuff.

With equities still under pressure and the favorability of treasuries a temporary phenomenon, I think that the latter is more likely. Already, gold prices have been basing at a technical support level. A retest of highs is certainly plausible right now.

But that's only half of the story.

The other half is in the gold miners. Traditionally, gold miners have been the best way for stock investors to get exposure to gold price movement. Because gold miners earn more when gold prices are higher, it's a logical way to profit from gold price appreciation. But that relationship has broken down a bit lately.

As stocks got shellacked since the beginning of the summer, the market dragged down miners while gold prices rallied. The spread between those miners and spot gold prices is a major trading opportunity right now.

Read more here

Click here for 5 Gold Stock Targets

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