• 13 hours Can Twitter Sway Economic Policy?
  • 16 hours Widespread Power Outages Hit New York City
  • 19 hours Equifax To Pay $700 Million To Settle Data Breach Case
  • 21 hours Netflix Struggles To Rebound After Subscriber Hit
  • 2 days $15,000 For Your Crypto’s Ticket To Visibility
  • 3 days The Next Fashion Frontier
  • 4 days What Is Africa’s Role In The New Silk Road?
  • 5 days Trump Was Right About The Dollar
  • 5 days Is Silver Gearing Up For A Rally?
  • 5 days World’s Largest Hedge Fund Turns Bullish On Gold
  • 5 days It’s Time To Spend More On Clean Energy R&D
  • 6 days Contrarian Investors Are Beating The Stock Market
  • 6 days Bulgaria’s Revenue Agency Falls Victim To Biggest Cyber Heist In History
  • 6 days Amazon Faces European Union Anti-Trust Probe
  • 6 days Commodities Are Having A Stellar Year
  • 7 days Bezos’ Next Big Project Could Be Worth $100 Billion Per Year
  • 7 days 3,600 Years Later, Climate Change Turns Mammoths Into $40M Market
  • 7 days Tesla, Apple Claim China Is Stealing Intellectual Property
  • 7 days EV Giants Duke It Out For Battery Dominance
  • 8 days Tech Billionaire Takes Aim At Google
The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

Przemyslaw Radomski

Przemyslaw Radomski

Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do…

Contact Author

  1. Home
  2. Markets
  3. Other

Mining Stocks' Rally Despite Gold's Decline

Quite a few rallies in the recent months were preceded by the mining stocks' outperformance relative to gold and we just saw the same kind of phenomenon on Wednesday – GDX rallied while gold declined. Is the bottom in?

Let's take a look at the miners' chart for details - other charts don't feature important changes from what we described previously so mining stocks are the part of the PM sector that we'll focus on in today's free article (charts courtesy of http://stockcharts.com):

VanEck Vectors Gold Miners Daily Chart

Miners indeed moved higher yesterday, which was nothing unexpected. In yesterday's alert we explained which technical phenomenon made it quite possible:

The volume was not just low – it was extremely low [on Monday]. Can it tell us anything? It suggests extra caution as metals and miners could be on the verge of a sudden upswing - that's what happened in the previous months. [as you can see on the above chart]

Mining stocks declined [on Tuesday], but the volume was low once again, which means that the above comments remain up-to-date. Miners could still rally on a very temporary basis before the big decline resumes.

Moreover, GDX moved to the rising support line, which could trigger another rally before the big decline starts.

Miners had a good reason to decline – gold declined yesterday. However, they didn't. Even the lack of movement would have bullish implications as miners would outperform in this case. The latter did more than that – miners rallied. Moreover, the volume that accompanied the upswing was bigger than what we've seen so far this week, which suggests that the move was not accidental.

The general stock market rallied as well, but the rally was not huge enough to explain – by itself – the strength seen in mining stocks relative to gold. Consequently, we view it as a bullish signal for the very short term. The emphasis is important, because this factor alone is not a game-changer in our view. There are many other factors that need to be considered and quite a few of them have bearish implications (for instance the breakdown in the gold to stocks ratio that we discussed earlier this week).

So, what does yesterday's strength in the mining stocks imply? That we could see higher prices in the precious metals sector in the next several days, but nothing more. In particular, it doesn't invalidate the bearish outlook for the medium term – it still seems that we will have to wait at least a few additional months before gold starts rallying "todamoon".

Summing up, it's quite likely that the precious metals sector is close to starting another big decline, but it's also likely that another short-term rally could be seen beforehand. The opportunity in the precious metals sector will likely present itself shortly, just like it is already the case with crude oil, forex and stocks (we currently have profitable positions in all of them).

Thank you.

 


The above is up-to-date at the moment of posting this article and the situation can change in the following weeks. In order to stay updated on our latest thoughts on the precious metals market (including thoughts not available publicly), we invite you to sign up for our free gold mailing list. You'll also get free 7-day access to our premium Gold & Silver Trading Alerts. Sign up today.

 

Back to homepage

Leave a comment

Leave a comment