Gold, Mining Stocks Confirm Positive Trend Reversal

We recently suggested that precious metals and mining stocks prices would climb higher after reaching new lows last week and we were accurate (See January 12, 2009 commentary). Over the past week RBY and gold jumped roughly 33% and 8% respectively.

On Monday,Rubicon Minerals executives released more promising results from its Red Lake, Ontario mining operations. After having intersected several bonanza grade gold zones in 2008, the latest discovery was in a “broad zone” over a “wide vertical range.” You’ll certainly want to pay close attention to the technical report to be filed on January 23 on www.sedar.com in which all results from its mineral-rich F2 zone will be given.

Today, we witnessed RBY jump over 10% in the early trading hours to a high of $1.27. Meanwhile, gold leapt past the $ 900 mark and set record highs in both euros and pounds. Most importantly, both RBY and gold breached previous resistance levels, sending us clear signals (See charts below.

We’d like to reiterate our expectation that a major long-term trend reversal should occur near January 26th. It’s rather interesting that Rubicon has chosen to release results on Jan. 23–the last trading day before the 26th. After such time, we expect a much shorter price correction.

Precious Metals Retreat after Reaching 2-Month Highs

Today the price of gold slid under $ 820 /oz. confirming our forecast in our most recent commentary. Accordingly, RBY’s price dipped below $1.00 signaling a buying opportunity is imminent. We’ll allow the dust to clear and wait for a clear short-term trend reversal before taking action.

Over the past 2 weeks, the price of gold rose close to $ 900 /oz., silver approached $ 12 /oz., and platinum signaled a clear trend reversal when it hit 2-month highs around $ 1,000 /oz. In the same period of time, we’ve received reports on recent gold trading trends and inflationary conditions suggesting that the long-term precious metals upwards trend will continue:

-Gold trading surged 20% as distrust in banks and economic turmoil persist.

-Australia’s Perth Mint bullion sales rose an astounding 194% in December 2008.

-The Bank of England cut the benchmark interest rate to its lowest level in history, 1.5%.

We expect precious metals and mining stocks prices to rebound within the next few trading days. Look for cyclical highs after next week as well as a major trend reversal near January 26.

Further evidence of the advance in prices is seen in the chart below, which shows gold ounces priced in British pounds. As the pound has weakened against the dollar in 2008, the price of gold in pounds has soared to all-time highs. As the tide begins to turn yet again, we’re expecting commodities prices to rebound–this time in dollar terms: