Chart courtesy of Stockcharts
As we can see from the above chart the RSI has dipped below '30' which for Agnico-Eagle has been a positive indicator for the stock in the past. Over the last few weeks the stock has retreated from around $60 to $44 registering a loss of 25%. Gold is also drifting lower and now has an RSI of 37.24, which raises the question of is now the time to buy ?
Agnico-Eagle Mines Limited is a quality gold producer and as regular readers know we do own this stock. The RSI dipping below '30' is in our humble opinion a good indicator that the stock has now been oversold. However we must view not view this one indicator in isolation as there are a number of other factors creeping into the equation such as those we have listed below:
1.We are entering into the summer period and gold has been known to spend the summer in the doldrums in a rather lackluster mood.
2.The P/E ratio is still very high at 87 especially when compared with other stocks in this sector as we have mentioned previously.
3.The broader markets, such as the DOW are still making progress which suggests that the economy is in better shape than we imagined and therefore attracts more cash to it.
4.The US Dollar is staging a mini rally and closed up yesterday at 85.99 on the US Dollar Index. Its debatable whether this is re-newed confidence in the dollar or a lack of confidence in other currencies such as the Euro.
5.The IMF could dump gold in order to generate cash to feed the stimulus, bailout, handout frenzy that is all the rage at the moment.
6.The Gold Bugs Index (HUI) has retreated from a recent high of 340 down to 275. This is worth watching as often it leads gold prices so if and when it turns up we can use it as a positive indicator and put it into the mix.
We can only conclude that Agnico-Eagle is getting closer to becoming a 'buy' however we still believe that cheaper prices for both gold and the gold producers lie ahead. So, once again we are going to wait a little longer and try to be patient. Overall we remain extremely bullish on both gold and silver and expect the year to end with both metals in record territory.
Hope this helps and please feel free to add your comments to this article as it helps to add some semblance of balance to the debate.
Agnico-Eagle Mines Limited trades on the NYSE under the ticker symbol of AEM and on the Toronto Stock Exchange under the symbol of AEM.TO.
Agnico-Eagle Mines Ltd (AEM) has a market capitalization of $6.78 billion, average volume of 4.45 million shares traded, a 52 week high $80.79, a 52 week low of $20.87, a P/E ratio of 87.11 down from 97.90 recently and closed yesterday at $43.70.
Trading decisions belong entirely to you as your circumstances are different from ours and we trade to suit our investment criteria and cash position.
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