May 24, 2024

K-Ratio Flashing Major Buy Signal For Gold Stocks

Gold Stock Buy Signal

One reliable  indicator that I have followed over the years to time the purchase of gold stocks is the K-Ratio.  At the present time, the K-Ratio is giving a strongly bullish signal.  The K-Ratio is computed by dividing the value of  Barron’s Gold Mining Index (GMI) by the Handy & Harmon gold price.  Using data from the latest issue of Barron’s, the K-Ratio is now at .90 and flashing a very strong buy signal.

The last extremely bullish reading was registered in late October of last year when the K-Ratio recorded an all time low reading.  Since last October gold mining stocks have advanced strongly with the XAU recording a 100% gain from the October bottom to its recent high of 140.

XAU Gold & Silver Index Courtesy

K-Ratio Forecasting Major Up Move for Gold Stocks

The K-Ratio works best at extreme readings when the GMI is below the price of gold, which is the case now.  The old rule of thumb is that an extreme bullish reading occurs when the K-Ratio is at 1.20 or lower indicating that gold stocks are cheap compared to the price of gold bullion.  In the past,  a sub 1.20  K-Ratio has triggered gold stock advances of over 50% and bullion advances of over 25% within 6 months.

K-Ratio Courtesy:   Kaeppel’s Corner

Some major gold producers that usually perform well in a rising gold market are KGC, GG and GOLD.   I would look for all of these issues to show major gains in line with the performance of the XAU over the next six months.

More On This Topic

Gold, Silver – An Important Alert!
The Gold Direction Indicator is flashing another buy signal.  This indicates that the pull-back that started late February is probably finished.  A new rally is about to start.