There were some hopes that a non-move by the Fed would end the current correction
in precious metals and spark a move to new highs. Unfortunately, the Federal
Reserve cannot override the supply and demand component of the market. Gold
and gold stocks popped higher but less than two days later the sector (and
specifically the miners) has given those gains back. That tells us plenty of
sellers remain and this sector needs more time and perhaps lower prices before
this correction ends.
The hourly charts, seen below show the miners selling off after testing their
50-day moving averages. GDX showed a bit more strength on this pop as it reached
its 50-dma before retreating. GDXJ nearly touched $49, which is within 10%
of the recent high before reversing those gains quickly. The miners could test
recent lows before retesting their 50-day moving averages.
The weekly charts indicate the correction can be deemed bearish consolidation.
The candles from the past three weeks have not been remotely bullish. The miners
had one solid down week followed by two weeks in which the market failed to
hold its gains. GDX (top) has key support at $25 while GDXJ (bottom) is trying
to hold above $44. Weekly closes below $26 and $44 could usher in more losses
in the short-term.
Turning to the metals, we find more encouraging signs as Gold and Silver have
maintained support quite well. The daily candle charts for Gold and Silver
can be seen below. For the third time in the past few months Gold was able
to hold support at $1300-$1310. Meanwhile, Silver held its August low and has
shown more strength than Gold recently. That is positive.
The precious metals sector remains in correction mode but the longer the sector
can hold and digest recent gains without significant price deterioration then
the more likely a bullish outcome becomes. The strength in the metals is a
healthy sign but the relative weakness in the miners and failure to hold gains
is a signal that the correction will definitely continue in terms of time.
Traders and investors should wait for either this market to become oversold
or the correction to mature. In the meantime, focus on the opportunities scattered
amongst individual companies rather than the sector itself.
