• 345 days Will The ECB Continue To Hike Rates?
  • 345 days Forbes: Aramco Remains Largest Company In The Middle East
  • 347 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 746 days Could Crypto Overtake Traditional Investment?
  • 751 days Americans Still Quitting Jobs At Record Pace
  • 753 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 756 days Is The Dollar Too Strong?
  • 757 days Big Tech Disappoints Investors on Earnings Calls
  • 757 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 759 days China Is Quietly Trying To Distance Itself From Russia
  • 759 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 763 days Crypto Investors Won Big In 2021
  • 764 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 764 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 767 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 767 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 770 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 771 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 771 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 773 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

Negative Divergence in Gold Stocks Bodes for Lower Prices

You have heard it before from us and probably elsewhere. The miners lead Gold. We have seen this every major turn dating back 16 years and it can also be the case with respect to short and medium term trends. While the precious metals sector has rallied over the past few weeks, the rally has been weak and the gold stocks relative weakness in recent days bodes negatively for the sector.

Consider the daily chart (below) and the overall performance from this past week. Gold gained $9/oz or 0.7% on the week but GDX and GDXJ lost 3.3% and 5.3% on the week. Silver gained 1.7% on the week while SIL lost 4%. More importantly, the gold stocks peaked seven sessions ago and are trading 4%-5% below that peak while Gold closed Friday at its highest level in October. This is not the type of action typical of a sustainable rebound.

Gold, VanEck Vectors Gold Miners ETF and Vaneck Vectors Junior Gold Miners ETF Daily Charts

As a result, we are looking for the gold stocks to trade lower and make an important low in the days or weeks to come. Two weeks ago we wrote of a confluence of downside support at GDX $22 and GDXJ $34-$35. The weekly candle charts below show very strong horizontal support targets a tad lower at GDX $21 and GDXJ $33. Roughly speaking, this indicates  potentially 10% downside in GDX and 15% downside in GDXJ.

VanEck Vectors Gold Miners ETF and Vaneck Vectors Junior Gold Miners ETF Weekly Charts

Unless the gold stocks are suddenly able to rally above the highs from seven sessions ago, they figure to retest recent corrective lows and perhaps make new lows. However, lower prices should lead to an excellent buying opportunity. This correction could end up like the 2002 correction in terms of price and the 2001 correction in terms of time. We are currently hedged and will redeploy that cash when the buying opportunity comes.

 


For professional guidance in riding the uptrend in Gold, consider learning more about our premium service including our favorite junior miners which we expect to outperform in 2017.

 

Back to homepage

Leave a comment

Leave a comment