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S&P/TSE Canada Gold Index11/08/02 11:48:18 AM
by Koos van der Merwe
With the anticipated rise in the gold price and gold shares should there be a war in Iraq, many gold shares are beginning to look promising. One of the 'shares' that has already given a buy signal is the XGD or S&P/TSE Canada Gold Index that is traded on the Toronto Stock Exchange.
|The chart below is of the S&P/TSE Canada Gold Index, more commonly known as the Gold I-Unit Index. I have included the Red/Green strategy to determine performance. (See my article, "Red/Green Strategy" posted on September 30, 2002.)|
|I-Units, the Canadian equivalent of exchange traded funds (ETFs), are traded on the Toronto Stock exchange. I use them as a good indicator of sector direction because they incorporate sophisticated investor sentiment due to their high price, presently at $44.75. This high price discourages penny pinchers or speculators from distorting performance.|
|S&P TSE Canada Gold Index|
|Graphic provided by: AdvancedGET.|
|The chart shows that a buy signal was given on the October 28, 2002, when the I-Unit crossed above the green line (the high of ten days ago). This has been confirmed by the RSI indicator which is bullish and rising.|
|To determine an estimated target value, I have drawn a consolidation triangle, and labeled it accordingly (see "Anyone for Gold?", October 29, 2002 ). Do note that the triangle strategy I used is the original classic strategy, not the strategy found in Elliott wave analysis.|
|Using this strategy, I find that should the I-Unit break out of the triangle at 'e' which is a possibility considering the recent strength in gold, the price could rise to 65.66 before falling back. The estimated date of the triangle apex is January 21, 2003.|
Koos van der Merwe
Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.
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