• 2 hours Did Big Bank Earnings Just Signal ‘Real’ Economic Recovery?
  • 1 day The Cannabis Industry Is Looking To Fill The Employment Gap
  • 4 days Earnings Beat Isn’t Enough for S&P 500 Q3
  • 6 days The New World Tax Order
  • 7 days Is Crypto Finally Ready To Pay The Piper?
  • 8 days Is It Time To Buy The Global Gaming Market Dip?
  • 11 days Even The Mafia Has A Millennial Problem
  • 13 days Zuckerberg Loses Billions in Social Media Outage
  • 14 days ‘Pandora Papers’ Leak Reveals More Financial Crime
  • 15 days US Retail Has A Major Supply Chain Problem
  • 18 days China Has Set Out To Crush Crypto...Again
  • 19 days Top Performing Cannabis Stocks of the Year
  • 20 days Millennials Could Power A 20-Year Bull Stock Market
  • 26 days The Million-Dollar Question: Will China Bail Out Evergrande?
  • 27 days 3 Restaurant Stocks In Full Recovery Mode
  • 27 days Bitcoin Is Driven By Testosterone
  • 32 days Quantum Computing Is The Newest Megatrend In Silicon Valley
  • 33 days How To Invest In The Cybersecurity Boom
  • 35 days Investors Are Patient With Unprofitable Giants
  • 37 days Wells Fargo Back In The Scandal Spotlight Once Again
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…

Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

  1. Home
  2. Markets
  3. Other

Rally in Gold and Gold Stocks Has More Upside

Gold and Gold stocks have rallied as expected and the consolidation in the miners in recent days looks bullish. GDX and GDXJ have digested the recent recovery quite well as Gold is testing resistance around $1200/oz. While the price action portends to more gains so does the breadth in the miners as well as short-term structure in the US$ index and bond yields.

In the first chart we plot GDX along with its advance decline (AD) line at the top. The AD line is the holy grail of breadth indicators as it is a trusty leading indicator. At the January 2016 bottom, the AD line was showing a strong positive divergence. Presently, the AD line is trading at a 3.5 month high and above its October 2016 high. If GDX were trading at the same relative level then it would be about 17% higher. Moreover, the AD line only retraced 38% of its 2016 advance while GDX retraced 62% of its advance. This suggests continued strength in the gold stocks.

US Dollar Index and 10-Year Yield Daily Charts

The current short-term trends in the US$ and bond yields also support more gains in the precious metals complex. The US$ index tried but failed to break 103.50 and should test at least 100. It could potentially decline to as low as 97 and test the 200 and 400-day moving averages. Meanwhile, it is no secret that bonds (like Gold) became extremely oversold (and yields extremely overbought). The 10-year yield, which closed at 2.38% should test at least 2.20% and could fall to 2.10%. Declining yields are immediately bullish for precious metals. 

VanEck Vectors Gold Miners and Gold Miners Advance/Decline Percent Charts

Strong breadth coupled with continued weakness in the US$ index and bond yields supports more gains in both Gold and the gold stocks. Our targets for the miners remain $25 for GDX and $40 for GDXJ. Those are the strongest and most reasonable targets but $26-$27 for GDX and $41-$42 for GDXJ are possible. Look for Gold to test $1220/oz while maximum upside on this rally is $1250/oz. We have turned more constructive on the miners but definitely expect another buying opportunity after the US$ and bond yields resume their uptrends.

 


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