The Next Low in Gold Stocks

In our most recent article, penned two weeks ago, we noted that if Gold broke support at $1920/oz, then it could lead to a breakdown in the sector that could result in Gold testing the low $1800s and GDX and GDXJ testing lower levels like $37 and $51.

Precious Metals have made a mini breakdown, and a healthy amount of risk has come out of the market. Would-be buyers and those with cash now have a better, lower-risk entry point. 

But the correction is not over yet.

As of Thursday’s low, GDX had corrected 19% and for only 1.5 months.

In the last article, we noted periods of correction and consolidation have, in some cases, lasted as long as six to 12 months. They can last as long as the preceding advance.

There is no single best historical comparison to the August peak, but elements from the peaks in 2002, 2006, and early 2009 are present. 

We highlight those peaks and compare how various oscillators registered based on 100 days and 200 days. 

GDX Parent Index w/ Oscillators

Moving on, and this is a more critical chart, we plot GDX performance following 2002, 2006, and 2009 peaks. 

An average of those corrections implies GDX could make a low in price very soon and then retest it at the end of the year, which means a nearly five-month-long correction in terms of time. 

GDX Correction Analog

Most of the price damage has already occurred, but there is the element of time to contend with. That is how these corrections work.

The low in price occurs reasonably soon, and then the market retests its low either once or, in some cases, twice. 

Odds are, Thursday’s low (or the coming low) will be retested before the bull market resumes its upward course.

In short, the sector is at a much better entry point now compared to weeks ago. However, one must be prepared for some chop as the correction is not over, and the market will likely retest the first low. 

In the meantime, we continue to focus on identifying and accumulating those stocks with significant upside potential over the next 12 to 24 months. To learn the stocks we own and intend to buy that have 3x to 5x potential, consider learning more about our premium service.