| Gold stocks tend to become extraordinarily volatile during weeks that feature multiple key fear trade events.
As the month of May begins, gold stocks are faced with a FOMC meeting and the US jobs report.
 
This is the daily gold chart.
Gold itself is quite stable ahead of these key events, in part because of steady physical market demand for India’s Akha Teej prosperity festival.
All gold market investors should consider owning at least some physical gold bullion, even if it’s a token amount. A gold bug should view bullion the way a fiat bug views their dollars.
Gold is money!
A solid bull wedge is in play on the gold chart and my 14,7,7 Stochastics series oscillator is flashing a buy signal.
Support is at $1268 and resistance is at $1288. If gold can close above $1290 on Friday after the jobs report… a significant rally is likely to occur.
Having said that, the current burst of physical market demand is likely temporary because the soft demand season really doesn’t end until August.
The bottom line is that gold might be making a final low for 2019 in the $1268 area, but the big upside action is unlikely to happen until the strong physical demand season begins later in the summer.
US stock markets are entering a big resistance zone as the weak month of May begins, and the dollar is beginning to decline against the yen.
This is gold-supportive.
The stock market needs strong oil company earnings and Trump just finished a fresh oil price bashing rant. If oil is peaking here, S&P500 earnings are likely to also be peaking.
The Fed is floating a new scheme to put QE in the hands of commercial banks. This may be partly to accommodate the US government’s voracious appetite for debt and it’s positive for gold.
It’s unclear exactly how the scheme would work since it’s still in the planning stages, but if this “commercial bank QE” program moves reserves back into the commercial banking system it could help boost loans growth.
That would boost money velocity and inflation.
This is the GDX daily chart.
While gold is quite stable this week, gold stocks are volatile and struggling. On the positive side, GDX volume has softened since the strong demand season peak in mid-February, Stochastics is oversold, and the price is at trendline and Fibonacci support.
On the negative side, there’s a potential bear flag pattern in play.
It’s not a textbook pattern; the flagpole is not vertical and the flag itself is rough, but gold stocks have an ominous history of staging dramatic sell-offs around and during FOMC meet days.
Traders may want to reduce size or go to the sidelines because even the best trading systems will produce a lot of whipsaw action at times like this.
I personally keep trading through these situations because when the trend finally asserts itself, I want to be in for the big move! Also, my trade size is reasonable. Trading accounts should only be one component of an investor’s total precious metals portfolio.
This is the weekly CDNX “traffic lights” chart. Junior mining stock enthusiasts need to be patient. It’s likely going to take a sustained gold price of $1370 or higher to generate a long-term buy signal for these miners. They will rally nicely before that happens but it may take until later in the summer to generate the “major league” buy signal that will produce gains of hundreds of percent per share for most of the stocks.
It’s hard to see the Fed doing anything tomorrow other than holding rates where they are now. A strong jobs report could be viewed as inflationary because the Fed seems reluctant to take on Trump and hike rates. There’s a lot of pension money in the stock market and rate hikes can really hurt that money. A May stock market swoon? Yes. A crash? No. A Friday close above $1290 for gold likely ends the current price correction and that should put gold stock investors in a great state of mind!
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