"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 17 hours Why Criminals' Cryptocurrency Choices Matter To Average Investors
  • 2 days OPEC ‘Supergroup’ Keeps Oil Exports Subdued
  • 2 days One Belt, One Road, One Direction for Precious Metals
  • 2 days Vicious Trio Keeps Bitcoin in Chokehold
  • 2 days How Infrastructure Is Driving A Commodity Boom
  • 2 days What’s Really Happening With Venezuela’s “El Petro?”
  • 2 days Gold Bull and Bear Markets
  • 3 days 5 Big Drivers of Higher Inflation Rates Ahead
  • 3 days U.S. And China To Face Off Over Aramco IPO
  • 3 days Gold Bulls, Brace Yourselves – Fed Hikes Are Coming!
  • 3 days Stocks Fail to Hold Gains, But Still No Correction
  • 3 days Cryptojacking: A New Threat Vector To Critical Infrastructure
  • 4 days Why The Next Oil Boom Will Be Fueled By Blockchain
  • 4 days 5 Things Investors Should Know About China this New Year
  • 4 days Is The South Korean Crypto-Drama Finally Over?
  • 4 days Miners’ Rally? What Rally? Watch Out for More Fake Moves!
  • 4 days Four Percent 10-year Note Yield Will Be a Floor Not a Ceiling
  • 4 days The End Is Near
  • 5 days 5 Record Breaking Gemstones Even Billionaires Can’t Buy
  • 5 days Irredeemable Currency De-tooths Savers
Decision Time

Decision Time

Last week, I mentioned that…

Stocks Fail to Hold Gains, But Still No Correction

Stocks Fail to Hold Gains, But Still No Correction

The U.S stock market indexes…

5 Big Drivers of Higher Inflation Rates Ahead

5 Big Drivers of Higher Inflation Rates Ahead

Investors got lulled into a…

When Will Gold and Gold Stocks Correct?

Wednesday evening we raised a question in a subscriber update. We wrote: The current question for Gold and gold stocks is if they will push to higher targets before or a correction or if a correction has already started. We should know the answer in the next day or two. The gold stocks exploded higher on Thursday. GDX gained 6% while GDXJ surged 7.4%. Meanwhile, Gold solidified its support at $1200/oz. Markets that become overbought within strong trends can become extremely overbought before they correct. Recent price action in the precious metals complex argues that the path of least resistance in the short term continues to be higher.

The chart below plots the weekly candle charts of GDXJ and GDX. The first observation is although the miners are very overbought on the daily charts, they aren't that overbought on the weekly charts. They will close this week flat after three strong weeks of gains. Also, the miners figure to face stronger resistance at higher levels. GDXJ is trading pennies below $25.00. If it surpasses its 80-week moving average then its next target is $27-$28. (Note that a measured move from the July 2015 to January 2016 consolidation projects to $28). Meanwhile, GDX is holding above previous resistance at $18. Its next strong resistance targets are $21 and $22. (The measured move from the July 2015 to January 2016 consolidation projects to $21).

GDX and GDXJ Weekly Charts

The monthly chart of Gold continues to give the most clarity on its prognosis. We have written about the importance of Gold holding support at $1180-$1200/oz, which it did this week. A monthly close above that support adds greater confirmation to a change in the primary trend. Gold has near-term upside potential to $1285/oz which marks monthly resistance and contains the 40-month moving average. Note that weekly resistance is at $1294. In addition, there should be very strong monthly resistance at $1330.

Monthly Gold Chart

The odds favor Gold and gold stocks continuing to move higher before a correction begins. Both GDX and GDXJ could gain more than 10% before reaching stronger resistance while Gold has upside potential to $1285-$1294/oz. The counter-trend moves within very strong trends occur quickly. Gold declined from $1264/oz to $1192/oz in less than three days while the miners (GDX and GDXJ) have corrected 9-10% twice in the past ten days. Unless Gold and gold stocks fall below Thursday's lows then we should anticipate higher prices in the short-term. A bigger correction will come but not yet.

 


Consider learning more about our premium service including our favorite junior miners which we expect to outperform in 2016.

 

Back to homepage

Leave a comment

Leave a comment




Don't Miss A Single Story