• 22 hours Markets Unfazed As Inflation Hits 13-Year High
  • 2 days How the Token Economy is Disrupting Financial Markets
  • 4 days FBI Investigating 100 Types Of Ransomware Attacks
  • 6 days Fed Ends Corporate Credit Emergency Lending Program
  • 8 days AMC Becomes the Latest Winning Meme Stock After GameStop
  • 9 days The Real Reason Your 401k Has Been Lagging
  • 10 days China Lifts Cap On Births, Allows Three Children Per Couple
  • 12 days The Market Is Ripe For Another GameStop Saga
  • 15 days Senate Grills Big Banks Over Pandemic Opportunism
  • 16 days Cannabis Has A Major Cash Problem
  • 17 days Ransomware Netted Criminals $350M In 2020 Alone
  • 18 days Russia Is Taking On Google
  • 19 days Chinese Regulators Deal Another Big Blow To Bitcoin
  • 20 days Ohio Residents Brave Vaccine for Chance To Win $1M
  • 22 days Inflation Is Coming. Are You Prepared?
  • 23 days 3 World-Shaking Trends Investors Need To Watch This Year
  • 23 days Travel Might Get Another Supersonic Disruption
  • 24 days The World Is Running Out Of 6 Key Resources
  • 25 days $15/Hour Minimum Wage Might Happen Naturally
  • 27 days Money-Laundering Binance Probe Report Adds To Bitcoin Woes
Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

  1. Home
  2. Markets
  3. Other

Knockout Punch for Gold Bugs

Two months ago the precious metals complex became extremely oversold and ripe for a rebound. Two months later and the overbought condition and bearish sentiment has been alleviated to some degree. Sadly for bulls, Gold barely rebounded while both Silver and gold miners performed worse. The broad precious metals sector appears to be in position for a breakdown that could be a knockout blow to gold bulls and gold bugs.

The weekly candle chart of Gold and Silver is shown below. Gold failed to clear $1160 in August and failed to close above $1150 last week. Gold is already down $33 this week and threatening to break lower from a triangle consolidation. Meanwhile, Silver has tried to surpass $15.50 but has failed a handful times. It is threatening to close at a new weekly low. The metals broke support in the summer and are threatening to break to new lows after retesting resistance (former support). This is textbook stuff.

Spot Gold and Silver Weekly Charts

The prognosis is the same for the miners. The daily bar charts for GDXJ and GDX are below. While the miners have held support, they have failed to generate anything during the rebound in Gold. Both GDXJ and GDX fell below their 50-day moving averages on Monday and have failed to recapture them. After Wednesday's strength the miners failed again at their 50-day moving averages, leaving a bearish reversal and very little breathing room.

Market Vectors and Market Vectors Junior Gold Miners Daily Charts

Another reason to be concerned is bearish sentiment has been unwound. From a bird's eye view sentiment is certainly very bearish and that supports the inevitable sustained rebound. However, near term indicators such as put-call ratios, speculative positioning and discounts to net asset value do not indicate extremes. While there are a fair amount of speculative shorts in the metals, there are also some speculative longs left. In other words, there are still potential sellers out there who can drive the price lower. These longs need to liquidate before true capitulation can been reached.

In the days and weeks ahead, investors and traders need to be vigilant and focus on taking advantage of the volatility. The precious metals sector is threatening to break lower. Shorts should use stops while longs should remain patient and wait for this potential breakdown to run its course. Personally, I'm hoping to accumulate my favorite junior miners as Gold nears major support at $1000 and as sentiment and technical indicators reach extremes.

 


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 into 2016.

 

Back to homepage

Leave a comment

Leave a comment