• 27 mins The Most Impressive Electric Vehicle Of The Year
  • 1 day Gold Miners Are Having A Stellar Second Half
  • 2 days How 3D Printing Is Turning Each And Every Industry On Its Head
  • 2 days Is The $3.5 Trillion Healthcare Industry About To Get Much More Transparent?
  • 3 days Gamblers Are Betting Big On Trump’s Impeachment
  • 3 days Even Banks Can't Answer Aramco's Trillion Dollar Question
  • 4 days Will Bezos Buy The Seattle Seahawks?
  • 4 days 6 Tech Trends Transforming The Travel Industry
  • 5 days Ousted Uber CEO Cashes Out $500 Million In Stock
  • 5 days Trump Prepares For Another Key Tariff Decision
  • 5 days The Free Money Bubble Is About To Burst
  • 6 days The Crushing Reality Of Poverty In America
  • 6 days Should You Buy Into The World’s Largest IPO?
  • 6 days The Infinite Possibilities Of Cosmic Energy
  • 7 days Analysts Link Walking To Economic Growth
  • 8 days Will Japan Turn Its Back On The Aramco IPO?
  • 9 days Global Debt Soars To $188 Trillion
  • 9 days The World's Largest Gold Miners Are Getting Creative
  • 10 days Twitter: The Saudi Spy Tool To Bring Down Dissidents
  • 10 days Broad Commodity Funds Don’t Give Enough Exposure To Gold
Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

  1. Home
  2. Markets
  3. Other

Gold: Rebound or Another Breakdown?

The precious metals complex has attempted to stabilize over the past few weeks. Some markets have had more success than others. Gold has been able to hold $1080/oz while GDXJ has also held its recent low. The large cap indices (GDX, XAU, HUI) have grinded lower to new bear market lows this week. This leads us to the near term predicament. Is the sector basing before a rebound or merely consolidating before another steep leg down?

Gold will certainly give us the answer and it could come within a few days. While Gold has held support at $1080/oz it has yet to break above $1100/oz. A daily close above $1100/oz would likely lead to $1140/oz whereas a daily close below $1080/oz could lead to a decline down to major support around $1000/oz. We should note that the current net speculative position in Gold is the lowest in 14 years at 3.4% of open interest or ~15K contracts. I would not be surprised to see speculators eventually become net short Gold.

Weekly Gold and Gold CIT Chart

Gold is not quite as oversold as the gold miners which have been beaten and bludgeoned to death. GDXJ and GDX, charted below, show black candles in each of the past seven weeks and in GDX's case eleven of the past twelve weeks. The miners are extremely oversold based on any and every metric and period. Note the price action over the past few weeks. The miners have failed to rally but have not closed near the lows of the week. That suggests waning selling pressure or accumulation. A rebound could begin at any moment.

Market Vectors Junior Gold Miners and Market Vectors Miners Charts

It would be quite interesting to see what happens to the miners if Gold were to break below $1080/oz and decline towards $1000/oz. Given that the miners are already extremely oversold (and in their worst bear market ever), it is quite possible they begin to rebound before Gold reaches support at $1000/oz. In addition, if this is the way Gold breaks (lower rather than higher) then it is also quite possible that the bear market ends after that decline. That would be sooner than everyone expects.

The near term remains uncertain but we could get clarity on Friday. In any case, the precious metals sector is due for a rebound. Failure to rebound in the days ahead tells us that we could ultimately see an even greater and more significant rebound from lower levels.

 


As we navigate the end of this bear market, consider learning more about our premium service including our favorite junior miners which we expect to outperform in the second half of 2015.

 

Back to homepage

Leave a comment

Leave a comment