Gold Stocks Continue to Lag Gold

NEW YORK ( TheStreet) -- It was one year ago last week, on Sept. 6, 2011, when the price of Comex gold traded as high as $1923.7 a Troy ounce, an all-time high.

I described the quick decline to $1535.0 on Sept. 26 and the subsequent low of $1523.9 on Dec. 29 as the popping of the gold bubble.

As 2012 began, the gold bubble tried to reinflate, but the high on Feb. 28 at $1792.7 was followed by a steady decline to $1526.7 the Troy ounce on May 16. On that day I wrote " It's Time to Buy Gold for a Trade."

On June 6 I wrote " Gold, Oil in Sync to Rally Now and Sink Later" and explained the importance of my annual pivot at $1575.8.

As that level continued to be a magnet into June 29, I wrote " Downside Risks for Gold, Oil and Stocks," where I explained the "sink later" scenario but stated that the upside first would not take gold to a new all-time high.

In July my coverage of Comex gold was in my Friday posts covering the U.S. capital markets. On the first three Fridays in July, gold closed the week above my annual pivot at $1575.8, which continued the "upside first" for gold as speculation in anticipation of QE3 began to pick up. Gold has been above my annual pivot since July 25, which targeted my semiannual levels at $1643.3 and then $1702.5.

On Aug. 23 I wrote " Gold Stocks Lag the Breakout in Gold Prices" as gold opened both above my semiannual pivot at $1643.3 and the 200-day simple moving average at $1649.2 on that day. In that article I profiled six gold mining stocks with the logic that if the gold rally continued gold shares would rise toward their 200-day simple moving averages.

Today I will update my profiles for these six gold stocks.

Since Aug. 23, Comex gold has been above its 200-day simple moving average and my semiannual pivot at $1643.3 as shown in the daily chart below. This technical breakout targeted my second semiannual risky level, now a pivot at $1702.5.

Source: Thomson/Reuters

The daily chart shows that gold has become overbought with its 12x3x3 daily stochastic reading rising to 89.00 on a scale of 00.00 to 100.00, where a reading above 80.00 is overbought. With gold above $1702.5 the upside is to my monthly and quarterly risky levels at $1753.7 and $1805.8, respectively.

Here is today's profile of the six gold mining stocks that I profiled on Aug. 23:

Reading the Table

OV/UN Valued: The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating: A "1-Engine" rating is a strong sell, a "2-Engine" rating is a sell, a "3-Engine" rating is a hold, a "4-Engine" rating is a buy and a "5-Engine" rating is a strong buy.

Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last twelve months. Stocks with a black number increased by that percentage.

Forecast One-Year Return: All stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.

Value Level: The price at which to enter a good-'til-cancelled limit order to buy on weakness. The letters are: W-Weekly, M-Monthly, Q-Quarterly, S-Semiannual and A-Annual.

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.

Risky Level: The price at which to enter a GTC limit order to sell on strength.

Barrick Gold ( ABX) ($40.16) is up since Aug. 23, still has a buy rating and low price-to-earnings ratio and is on track for a test of its 200-day simple moving average at $41.95. ABX traded as high as $55.95 as gold peaked one year ago.

AngloGold ( AU) ($34.18) - is just below its Aug 23 level, still has a buy rating and low P/E ratio and is on track for a test of its 200-day SMA at $37.95. AU traded as high as $49.14 after gold peaked a year ago.

Gold Fields ( GFI) ($13.31) - is just below its Aug. 23 level, still has a buy rating and low P/E ratio and is on track for a test of its 200-day SMA at $14.09. GFI traded as high as $18.49 after gold peaked a year ago.

Harmony Gold ( HMY) ($9.02) is below its Aug. 23 level, has been upgraded to buy from hold, has a reasonable P/E ratio and is on track for a test of its 200-day SMA at $10.79. HMY traded as high as $15.10 before gold peaked a year ago.

Kinross Gold ( KGC) ($9.66) is up since Aug. 23, has been downgraded to hold from buy, has the highest P/E ratio of these six stocks, and tested its 200-day SMA at $9.79 last Friday. KGC traded as high as $18.25 as gold peaked a year ago.

Newmont Mining ( NEM) ($51.69) is up since Aug. 23, still has a buy rating and reasonable P/E ratio and is on track for a test of its 200-day SMA at $53.33. NEM traded as high as $72.42 two months after gold peaked a year ago.

In sum, a year ago each of these gold mining stocks was above its 200-day simple moving averages, and they led gold to the downside as Comex gold did not break below its 200-day until March 28. Gold broke out above its 200-day moving average on Aug 23 while gold shares remain below their 200-day SMAs. If these gold mining stocks do not play catch-up, I would view that as a warning for gold.

Comex gold is 6.4% below its level of a year ago, while the table above shows that gold shares are down between 17.5% for NEM and 45.1% for KGC.

At the time of publication, Suttmeier had no positions in stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.