Kimble Charting Solutions: Watching the Gold Miners

Spread Between XAU and the Gold Price Is Widest In Years

March 4, 2020 Bob Weir Kimble Charts, Mining, Mining - Precious Metals

eResearch | Today’s article from Chris Kimble is about the relationship of certain related assets and, specifically, the spread between the Gold/Silver Miners Index (symbol XAU) and gold prices.

When the prices of related assets become too wide, there is a strong tendency for the prices of these assets to carry out a reversion to the mean.

In such cases, this reversion can provide investors with exceptional profit opportunities.

The following chart shows that the spread between the XAU and the price of gold is the widest it has been in years.

2020-03-05 Kimble chart
Source: https://kimblechartingsolutions.com

When XAU (i.e., the mining stocks) is out-performing Gold and the spread is wide (at each 1 on the chart), the miners tend to under-perform the price of gold.

However, when the miners are under-performing and the spread is wide (like it is now), the potential is there for the miners to play catch-up. The last two times this took place at each (2 on the chart), the mining stocks did very well.

The XAU index is facing peaks that took place in 2013 and 2016. From a technical perspective, until these former highs are broken to the upside, they act as strong resistance.

If the XAU index does break out, a rally could follow.  This could be an opportunistic time to speculate in gold mining shares, so keep them on your radar screen!

To see the XAU Index, click here: Gold/Silver Miners Index (XAU)

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About Bob Weir 3002 Articles
Bob Weir has over 50 years of investment research and analytical experience in both the equity and fixed-income sectors, and in the commercial real estate industry. He joined eResearch in 2004 and was its President, CEO, and Managing Director, Research Services until December 2018. Prior to joining eResearch, Bob was at Dominion Bond Rating Service (DBRS).

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