• 12 hours Big Business’ New COVID Initiative: No Jab, No Job
  • 3 days The Most Interesting Stocks Of Earnings Season, For Better or Worse
  • 5 days Chinese Stocks Rebound After Regulatory Scare
  • 6 days Apple Stocks Falls After Blowout Earnings Report
  • 6 days The 5 Biggest IPO Disasters Of 2021
  • 7 days Crypto-Based ‘Shadow Financial Market’ Spooks Regulators
  • 10 days Ireland Balks At Biden’s Global Tax Plan
  • 13 days Robinhood To Trade On Nasdaq Targeting $32B Valuation
  • 17 days Facial Recognition Is Watching You
  • 18 days Biden’s $3.5T ‘Human Infrastructure’ Workaround
  • 18 days The Fed’s $3 Trillion Headache
  • 21 days Why Bitcoin Could Struggle To Recover After Epic Crash
  • 22 days Wells Fargo Back In The Spotlight Over Personal Loan Cancellations
  • 22 days Delta Variant Real Threat To Economic Recovery
  • 25 days JEDI Drama Continues With Microsoft Contract Cut
  • 27 days DiDi Shares Take a Beating From Chinese Regulators
  • 28 days Thousands Of Companies Hit In Latest Ransomware Attack
  • 29 days Jobs Report Has Big Numbers, But Still Big Problems
  • 29 days Robinhood’s ‘Mission’ Questioned in $70M Fine
  • 33 days Didi Just Went Public, And Uber Is Loving It
Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

  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