Gold, Silver and Oil Commodities Out Perform Their Equities?

By: Chris Vermeulen | Sun, Nov 22, 2009
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Since the market crash in late 2008 we have seen investors favor quality stocks that pay dividends and have steady earnings. Fast growth companies and equities with physical resources like commodities have also done well.

Let's examine the monthly charts of gold, silver, oil and natural gas - and observe how they have traded in comparison to their mining equities

Gold - Monthly Chart

Looking at the monthly chart as far back as 2004, we see that gold has formed the same patterns repeatedly. This has created a stair step pattern and allows us to calculate measured moves and a time frame for this to take place.

As we can see gold has broken its 2008 high and is starting another rally which we have seen several times before. I figure we could see gold rally for another 3-5 months and possibly reach the $1500 -$1600 level before forming a multi month or year consolidation.

Investors around the world are buying gold because it is a physical product which has been proven to hold its value.

Silver & Precious Metal Stocks - Monthly Chart

Silver and PM stocks have been trading in tandem since 2004 and we can see this by looking at a price performance chart of both silver and the HUI index. The interesting part is that the physical commodity silver has held its value better than the stocks during corrections.

Apparently investors prefer tangible investments over stock certificates of mining companies in periods of increased volitility. Lower risk is in the commodity.

Oil - Monthly Chart

Crude oil has held its value over energy stocks for the majority of the time since 2003. And currently, investors are more comfortable holding oil as a safe investment over energy stocks.

Natural Gas - Monthly Chart

Natural gas is the energy sector's underdog in my eyes. The world has found so much natural gas in the ground and discovered cost effective ways to collect gas that it will continue to see investors move away until inventory start to deplete.

Commodity Trading Conclusion:

Investors around the world continue to put money into gold which is a universal hedge against inflation. The broad market appears to be trading at a major resistance level. Tops in the market generally take a much longer than to reverse directions than market bottoms. We will not knot for sure if we are entering a top for a couple months as the charts unfold. Now that commodities are trading back at reasonable levels I think they will hold up better than equities if the market starts to correct.

We continue to enter low risk setups and trade with this strong up trend but are aware that we must be protected and focus on the lower risk plays.

If you would like to receive my weekly trading reports please visit my website at: www.TheGoldAndOilGuy.com

 


 

Chris Vermeulen

Author: Chris Vermeulen

Chris Vermeulen
President of AlgoTrades Systems
www.TheGoldAndOilGuy.com

10126 Hwy 126 East, RR#2
Collingwood, ON, L9Y 3Z1

Chris Vermeulen

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized market technical analyst and trader. Involved in the markets since 1997.

Chris' mission is to help his clients boost their investment performance while reducing market exposure and portfolio volatility.

Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. Chris is responsible for market research and trade alerts for of its newsletter publication.

Through years of research, trading and helping thousands of individual investors around the world. He designed an automated algorithmic trading system for the S&P 500 index which solves his client's biggest problem related to investing in the stock market: the ability to profit in both a rising and falling market.

AlgoTrades' automated trading systems allows individuals to investing using either exchange traded funds or the ES mini futures contracts. It is supported by many leading brokerage firms including:

- Interactive Brokers
- Trade MONSTER
- MB Trading
- OEC OpenECry
- The Fox Group
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- Vision Financial

He is the author of the popular book "Technical Trading Mastery - 7 Steps To Win With Logic." He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites. His list of personal and professional relationships approaches 25,000, people with whom he connects and shares is market insight with out of his passion for trading.

Chris is a graduate of Seneca College where he specialized in business operations management.

Chris enjoys boating, kiteboarding, mountain biking, fishing and has his ultralight pilots license. He resides in the Toronto area with his wife Kristen and two children.

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Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/