When stocks are down, Gold is another alternative investment that may give you substantial returns. Gold is one of the most precious metals in the world and is highly fungible because of its monetary value. It has been used for ornamentation or as a medium of exchange for centuries even dating back to prehistoric times.

The Weekly chart of the US Dow Jones Gold Mining Index, shown above, shows just how strong Gold is for the past 7 years. The major trend line was only tested 3 times which shows the strength of its uptrend.  After reaching an all time high of 125 in early 2006 however, a major correction occurred and re-tested the support level at 80 in 2007. Gold then rallied back up again to the 120 level just at the start of 2008. The high of 125, established in early 2006 was never tested though. We can see that Gold is currently on a sideways trend for the past 2 years. The movement of Gold seems to indicate the formation of a symmetrical triangle pattern which is a period of indecision. However, given that the uptrend is still intact, it is highly the case that Gold will continue higher.

US Dow Jones Gold Mining Index - Daily Chart

The recent price movement of Gold as shown in the Daily Chart above indicate a strong bullish move. After the massive sell-off last March, the Gold index respected the major trend line as it rallied back towards the 50 day and 200 day moving averages. The 100 day moving average (blue line) now acts as a temporary resistance level. If prices go beyond the 3 moving averages (green, yellow, and blue), this may even reach the 114 high first then retest the 120 level again, set in early 2008. The only problem with the current rally is its low volume. Thus, if prices do not go beyond the 3 moving averages, we may see the index to move sideways.

The Gold Mining Industry remains bullish in the long term as long as major uptrend is intact. In the short to medium term time frames however, Gold is on a sideways trend. It may be just a matter of time before it breaks out to the upside.  Thus, it may be wise to study stocks and companies in this sector as opportunities may be abound.