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.
Good Luck!
