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Agnico, Randgold, Yamana Rise as Banks Fall!

AEM chart 21 apr 09.JPG

Agnico-Eagle Mines limited (AEM) jumped 7.61%, Randgold Resources Limited (GOLD) jumped 10.07% and Yamana Gold Incorporated (AUY) jumped 3.88% yesterday as the banking sector went into reversal mode with Bank of America (BAC) dropping 24.34%, Citigroup Incorporated (C) dropping 19.45% and Wells Fargo and Company (WFC) dropping 16.09%.

The banking sectors reversal hit the DOW pretty hard as it closed down 289.60 points on the day. There are many other correlations that can be made but this one is interesting in that it highlights the sensitive mood of the investors as they try to play the current rally in the broader markets and lock in short term gains.

On the other hand we have been watching stocks such as Agnico-Eagle for a bounce, as one of its technical indicators, the RSI, approached the '30' level which suggests that the stock is oversold and the reaction came yesterday. Is this the start of a new rally for gold and its associated stocks, we cant say based on one days data, however its good to see gold move away from its support levels as a penetration could have seen gold go a lot lower.

Back to the banks, it would appear that a statement by the Bank of America, reported by the Wall Street Journal as follows, spooked the market:

U.S. financial stocks were sharply lower in midday action Monday after Bank of America Corp. said it earned more than $4 billion in the first quarter but warned credit markets continue to deteriorate on a stagnant economy and rising unemployment.

No doubt there will be an item of good news somewhere that can be parlayed into something bigger that will drive the markets back up again. Volatility will remain the order of the day so keep your hard hats on.

We are not convinced that this is a good entry point for the acquisition of more gold producers so we will keep our opportunity cash on the sidelines for now. However, we have had a number of emails to the effect that now is the time to buy, if you feel the same way then don't let us stop you.

Taking a quick look at the chart we can see the bounce off the RSI giving AEM a good boost today, something to watch for in the future as you formulate your trading strategies.

Have a good one.

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