When PNC Wealth Management released its 2010 Christmas Price Index this month (PNC), the cost of the five golden rings in the traditional "12 Days of Christmas" tune was pegged 30 percent higher than last year (don't ask how much those French hens cost now; you don't wanna know).
Overall, Christmas will cost 9.2 percent more this year, helped in large part by the bullishness in gold prices. Procrastinatorsthose who haven't yet done their holiday shoppingshouldn't despair, though. There may still be a bargain to be had for the bullion-minded. At least that's what the time-tested Relative Strength Index indicates.
The RSI is a widely followed momentum oscillator that compares the magnitude of a security's or a commodity's recent gains to that of recent losses. The comparison results in index readings ranging from 0 to 100.
Charting the RSI next to a security's price offers clues about the "oomph" behind the price. A divergence between the price and the RSI trends is a very reliable signal of an impending market turning point.
Take a gander at the chart of the SPDR Gold Shares Trust (NYSE Arca: GLD) below. Since October, GLD prices have trended upward, albeit raggedly, while the RSI has been in a downtrend. Such patterns lead technicians to conclude that the recent upspikes in gold (you see the same prefigurement on the cash bullion and COMEX futures charts) have been scored with ever-weakening momentum.
If you watch the COMEX open interest figures, you certainly get a sense of that. Interests in gold futures topped out at better than 651,000 contracts in mid-October and have since withered below 600,000.
That's really no surprise given year-end price dynamics. After all, gold's risen 30 percent this year, according to the PNC elves, so it's only natural that fund managers would book profits before the annual mark-to-market (taxes are due on open futures' gains held through Dec. 31).
Still, the trends' disparity points to a prospective bullion sale soon, maybe before St. Nick starts stuffing stockings.
Whether that'll make for a better deal at the jeweler's will depend, of course, on the retailer's turnover rate. Procrastinators might obtain a little negotiating room when haggling for glittery trinkets, but buyers of the PowerShares DB Gold Double Short ETN (NYSE Arca: DZZ) would certainly derive immediate benefit. The DZZ notewhich is designed to deliver twice the daily inverse return of gold futureshas been battered this year but looks to have formed a double bottom at the $8 level.
Late-season jewelry buyers should take comfort if DZZ manages some convincing closes above the $8.91 level (the note last traded at $8.41 Friday), but shouldn't lose hope if the note doesn't rally. There's always a fallback position.
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