Gold, Silver Churning Towards A Bottom
Gold, Silver & Precious Metal Miners Signals
It has been a very long couple of years for the precious metal bugs. The price of gold (GLD), silver (SLV) and their related mining stocks have bucked the broad market up trend, and instead have been sinking to the bottom in terms of performance.
In my view it looks as though the broad stock market uptrend will be coming to an end sooner than later. The good news is that precious metals have the exact flip side of that outlook. They appear to be bottoming as they churn at support zones.
While metals and miners remain in a down trend it is important to recognize and prepare for a reversal in the coming weeks or months . Let's take a look at the charts for a visual of where price is currently trading along with my analysis overlaid.
Gold Outlook:
Gold has been under heavy selling pressure this year and it still may not be over. The technical patterns on the chart show continued weakness down to the $1300 USD per ounce, which would cleanse the market of remaining long positions before price rockets towards $1600+ per ounce.
There is a second major support zone drawn on the chart which is a worst case scenario. But this would likely only happen if US equities start another major leg higher and rally through the summer.
Gold Futures Weekly Chart
Silver Outlook:
Silver is a little different than gold in terms of where it stands from a technical analysis point of view. The recent 10% dip in price, which shows on the chart as a long lower candle stick wick, took place on very light volume. This to me shows the majority of weak positions have been shaken out of silver. Gold has not done this yet and it typically happens before a bottom is put in.
While I figure gold will make one more minor new low, silver I feel will drift sideways to lower during until gold works the bugs out of the chart.
Silver Futures Weekly Chart
Silver Mining Stocks ETF (SIL) Outlook:
Silver miners are oversold and trading at both horizontal support and its down support trendline. Volume remains light meaning traders and investors are not that interested in them down there, and it should just be a matter of time (weeks/months) before they build a basing pattern and start to rally.
SIL Weekly Chart
Gold Mining Stocks ETF (GDX) Outlook:
Gold mining stocks continue to be sold by investors with volume rising and price falls. Fear remains in control, but that may not last much longer.
GDX Weekly Chart
Gold Junior Mining Stocks ETF (GDXJ) Outlook:
Gold junior miners are in the same boat with the big boys. Overall, gold and gold miners are still being sold while silver and silver stocks are firming up.
GDXJ Weekly Chart
Precious Metals Trading Conclusion
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In the coming weeks we should see the broad stock market top out and for gold miners along with precious metals to bottom. There are some decent gains to be had in this sector for the second half of the year but it will remain very dicey at best.
If selling in the broad market becomes intense and triggers a full blown bear market occurs, money will be pulled out of most investments as cash is king. Gold is likely to hold up the best in terms of percentage points, but mining stocks will get sucked down along with all other stocks for a period of time. This scenario is not likely to be of any issue for a few months yet but it's something to remember.
Courtesy of Chris Vermeulen, www.TheGoldAndOilGuy.com