Gold and Silver are going to close down for the third consecutive day and
the third consecutive week. As we pen this on Friday, Gold bounced from $1162/oz
and could close near $1170/oz while Silver traded below $16/oz and may close
at $16/oz right on the dot. Both metals are now dangerously close to their
final weekly supports and therefore one step closer to an important technical
breakdown.
The weekly candle chart for both metals is shown below. Today's action has
yet to be updated. Nevertheless, we can see the clear important weekly support
for both metals. For Gold it's roughly $1150 and for Silver it's $15.50 to
$15.70. The failure of the metals to rally out of their 7-month long bases
bodes bearish for the weeks ahead. Furthermore, let's not forget the relatively
high net speculative positions seen in both markets. The COTs will be updated
by the time you read this but odds are there are plenty of speculators left
to drive the metals to a final breakdown.
The miners, which peaked before Gold in 2011 and have shown more strength
(or less weakness) in recent months figure to lead the sector out of the coming
bottom. At the least, the miners are likely to remain above their lows as the
metals break their own lows. In daily terms, Gold is about 2.5% from its low
of $1140 while GDX and GDXJ are roughly 13% and 15% from their daily lows.
The weekly chart below plots GDXJ and GDX and their weekly support (in blue).
Put yourself in position so you can take advantage of the coming breakdown,
rather than be a victim of it. We booked profits in our hedges today and will
look to reload if the metals rebound next week. We also advise tuning out the
super bulls and super bears who are calling for price targets which have no
fundamental or technical basis. Extreme targets are an emotional distraction
and not actionable.
Mind you, we are huge gold bulls and expect a very sharp rebound to come after
this final breakdown runs its course. If and when Gold reaches major support
around $1000/oz, it will likely find itself extremely oversold with very negative
sentiment. That combination along with strong technical support can produce
a big rebound. The coming breakdown in the metals could create one last chance
to buy quality junior miners at bargain prices.