• 311 days Will The ECB Continue To Hike Rates?
  • 311 days Forbes: Aramco Remains Largest Company In The Middle East
  • 313 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 713 days Could Crypto Overtake Traditional Investment?
  • 718 days Americans Still Quitting Jobs At Record Pace
  • 720 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 723 days Is The Dollar Too Strong?
  • 723 days Big Tech Disappoints Investors on Earnings Calls
  • 724 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 726 days China Is Quietly Trying To Distance Itself From Russia
  • 726 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 730 days Crypto Investors Won Big In 2021
  • 730 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 731 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 733 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 734 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 737 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 738 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 738 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 740 days Are NFTs About To Take Over Gaming?
Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

  1. Home
  2. Markets
  3. Other

Gold's 2016 Bull Market Moving Off Course

While we expected additional weakness in Gold and gold stocks (weeks ago) we did not quite expect the kind of selling the sector experienced in the wake of Donald Trump's election victory. The market reacted by sending bond yields dramatically higher which resulted in stronger real interest rates, which is fundamentally negative for precious metals. This has created significant technical damage in the sector and has potentially thrown the 2016 bull off course.

Our first chart shows how and when this bull market went off course. Below we compare the current rebound in Gold to some of those from the past. As you can see, the 2016 rebound was well on course until the second half of September. That is when historical bull markets pushed higher. Unfortunately, Gold broke lower and has continued to trade lower. It has diverged from its bull market course.

Gold Bull Analog Daily Chart

Our next chart pertains to the bull market in gold stocks and specifically the HUI Gold Bugs Index. The chart shows that this needs to be an important low for the bull market to remain intact. While I expect a rebound very soon, I have some doubts that the low will hold.

HUI Bull Analog Daily Chart

Next we compare the current correction in the HUI to past bull market corrections. Like the last analog, this one shows the gold stocks need to begin a big rebound for their bull market to remain intact. Both analogs show that the gold stocks cannot go lower from here if they are to remain in a bull market.

HUI Corrections in Bull Markets

Both history and current price action argue that Gold and gold stocks are at risk of a big decline if they lose the current lows. If Gold loses $1200/oz then it could drop quickly to $1080/oz or even $1050/oz, the major low. The same can be said for GDX which bounced from its 62% retracement and 80-week moving average at $20. Below I have sketched out how this bearish scenario could play out. Note, this sketch is purely subjective and subject to change. 

Gold and GDX Weekly Charts

Unless Gold and gold stocks hold current levels and form an important low then the 2016 bull market has gone off course. At present, the evidence favors the bearish scenario which has the sector trading lower in the months ahead. We could chalk this up to a fundamental change (which I consider to be temporary) coupled with the potential for a spike in the US Dollar. Investors are advised to de-risk their portfolios during the coming rebound and prepare for a better buying opportunity at the end of winter.

 


For professional guidance in riding the bull market in Gold, consider learning more about our premium service including our favorite junior miners for 2017.

 

Back to homepage

Leave a comment

Leave a comment