Gold and gold mining shares rebounded strongly from the end of December through the first three weeks of January. Over the past several weeks the sector has digested those gains while holding above rising 50-day moving averages. The sector is nearing a bit of a decision point where either a breakout could occur or further corrective activity.
Gold has snapped back after hitting trendline resistance at $1300/oz. Gold is consolidating below the trendline and around its 400-day moving average ($1277/oz) which it has not wrestled with since exactly two years ago. A confirmed break above the trendline and $1300/oz would potentially put Gold on a path to $1400/oz. There is Fibonacci resistance and weekly resistance around $1380-$1390/oz. If Gold can’t breakout then look for support around $1240/oz.
The daily line chart of GDX (large gold miners) is below. GDX has consolidated below a confluence of major resistance for several weeks and has held in well. The 400-day moving average has marked each important top since 2012 while the trendline dates back almost as far. A confirmed break above the trendline would bring targets of $27.50 (21% upside) and $30.00 (25% upside) into play. A break above an RSI of 70 would signal sustained positive momentum and offer strong confirmation of the breakout. GDX has strong support at $20.50.
Gold and gold miners in particular have digested recent gains in bullish fashion and could be positioning for the next move higher. The miners turned up in December ahead of the metals and led the rebound. In recent days the miners have inched higher while Gold and Silver have remained flat. That leadership could be another positive leading indicator. At the same time, failure to breakout immediately isn’t necessarily bearish. Further consolidation while maintaining support puts the market in better position for a sustainable breakout. Given the significance of the 400-day moving averages, the next breakout could mark the start of a bull market in earnest. Consider learning more about our premium service which includes a report on the top 10 junior miners to buy.
Jordan Roy-Byrne, CMT