Pessimism and fear reign as the gold stocks test previous resistance as support. Previous resistance was massive resistance zone of the 30-year consolidation broken in 2010. What do I think? I think long-term capital recognizes the importance of this breakout. 2012 retest, a period in which gold and gold stocks will have been pronounced dead numerous times, will be viewed no different than the retest of 1961-1962. Long-term capital will have used the fear-induced weakness and churn to build their positions for tomorrow's profits.

S&P Gold (Formerly Precious Metals Mining)*

Hi Eric,

Do you have any thoughts on the breakdown in gold shares despite the resilient metals' pricing? In my experience, the few institutions that have any exposure to gold stocks have generally held them as a "hedge". When things got dicey last year and gold spiked, these stocks rose moderately at best--that is to say, the "hedges" did not "work". Now that the economy is widely believed to be improving, why bother holding hedges that won't pay off when they're 'supposed to' is my guess as to the likely thought process of the fund managers obviously running for the exits on these things. What do you think?

Best, Michael

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