…Gold, and in particular the gold stocks, are threatening more losses even before a push higher in the greenback. It is time to be defensive and cautious.
This article is an edited ([ ]) and revised (…) version of the original written by Jordan Roy-Byrne CMT, MFTA to ensure a faster & easier read. It may be re-posted as long as it includes a hyperlink back to this revised version to avoid copyright infringement.
Although GDX is holding its 200-day moving average and has yet to pierce its October low, GDXJ already has. The juniors (GDXJ) closed below their October low and broke their uptrend line from May after failing twice at the 200-day moving average. The break below $33.50 projects down to $32.00. The juniors lack strong support until $30 while GDX’s initial support levels are $22 and $21.
Gold, which traded as high as $1308 early last week, closed the week at $1280. Its initial support is at $1255-$1260. If GDX joins GDXJ and breaks its October low then we would anticipate Gold does the same. In that case, the next strong support level is around $1215-$1220. Gold’s net speculative position of 41.9% of open interest remains relatively high and suggests potential selling power should traders turn bearish.
The big picture view on miners is they remain in a complex bottoming pattern that began over four years ago. While the multi year outlook favors a break of the 2016 highs and a massive move higher, the near-term outlook is clearly bearish. GDX and GDXJ appear very likely to test their July lows and there is a risk they could even retest their December 2016 lows at $18 (GDX) and $27 (GDXJ).
The near-term outlook for precious metals and gold miners especially is negative and traders and investors should therefore stand aside and wait for more favorable conditions.
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