Michael has been consistently more bullish on the gold shares than on gold bullion. The price and momentum charts shown on your left certainly help to understand but they also underpin his bullish view on gold mining shares.  Here is what he wrote earlier today:

Relative performance of gold miners vs. gold

“Spreads offer vital technical information, often more important and revealing than other technical features of a market. We don’t rely on simple spread charts, now common on the financial web. A spread is merely a variant of a price chart (one price vs. another) and is equally susceptible to the same deficiencies as price charts. Such as not adequately warning of trend change.

“We use the XAU Index as our metric of gold miners here because most gold mining ETFs don’t have sufficient price chart history. While the spread chart was in its continual state of decline in the latter half of 2015, annual momentum had already begun to shift. It was for this reason, even before gold broke out to the upside in early 2016, that MSA argued that gold miners, despite their long and bedraggled history of underperformance vs. gold, would be a better place to be in a new gold bull trend. This conclusion was based entirely on the momentum of the spread, not on the spread itself, which has since come to life; nor was it based on any fundamental appreciation of the gold miners. First, a major downtrend on annual momentum (black) came out in that latter half of 2014. Early warning of upside emergence. In late 2015 a gradual three-point downtrend (red) was overcome, and finally a breakout over the zero line occurred in early 2016, thereby moving above all the momentum action going back to 2008! Given the dimensions of the basing action and its upside youth, we think this positive performance by the miners vs. the metal will likely persist for many months if not quarters. We suspect that the next major resistance for the spread (based on the spread chart and referencing prior peak momentum readings) will occur around 12% (XAU’s price rising to 12% of the price of gold). At the lows, XAU was 4.1%; now it’s 7.63% relative to the price of gold.

“Profit significance? No, it’s not a mere gain only of a handful of percentage points. If one bought XAU Index (not available as a vehicle, so you bought GDX, but used XAU vs. gold spread as your technical data) in late 2015/early 2016 you would have put on the spread position at 4.5% to 5%. Now at 7.6% you are up by at least 50%, and that’s being long the gold miners while simultaneously short gold. If the spread reaches 12%, then it will have been like buying a stock at 4.5 to 5 and selling it at 12. Not bad for a theoretically “neutral” position which seeks to make money in a positive gold market environment, and yet is short gold. The point here is not to argue for a position in the spread, but to demonstrate the performance potency of gold miners relative to gold in today’s market.”