Thursday, September 07, 2006

Gold stocks champion the market still

The performance of gold stocks in recent weeks shows us that investors have not abandoned their attachment to the commodity's bullish fate. Trading in Goldcorp (G) was again active, although the stock only advanced 1%. Goldcorp's courting of Glamis has been measured by the market, and the verdict is acceptable. Most importantly, the gold sector remains the market leader on the TSX, outperforming the broad market over the last 3-months by 11%. In the context of the ascendancy of this important commodity, it is again worthwhile to review the gold sector's relative performance to the equally important energy sector. Although both sectors are drivers of the TSX, they have a long-term pattern of inverse correlation. The graph above shows us that gold stock's relative performance has wrestled the lead from the formerly ascendant energy sector. This shift dates from about 52-weeks ago. The commodity currency for the two years prior to September 2005 was crude oil, but the pendulum has again shifted back to precious metals. Gold stocks are sparkling because it is their time to sparkle.
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