Gold & Gold Stocks Ripping. What's Next?

Jordan Roy-Byrne

It was a huge week for the gold stocks. GDX gained nearly 7% while GDXJ surged over 10%. 

Gold hit $1450/oz after Thursday before selling off Friday. Silver met the same fate on Friday but managed to close the week up over 6% and at a new 52-week high. 

Let’s take a look at the current technicals.

Gold closed the week just below $1427/oz. If it remains above $1420-$1425, then it is likely to trend towards $1475/oz, which is the only resistance between $1425 and $1525.

If Gold trades back below $1420 then there is a risk it could test $1380 again.

Silver has taken out resistance at its 400-day moving average in convincing fashion but needs to surpass its February 2019 high. Its next major resistance target is the mid $18s. 

Turning to the stocks, we start with GDX which is closing in on its 2016 high. Should Gold trend towards $1475/oz then GDX would likely retest that 2016 high at $31.

Breadth remains strong and so too is GDX’ relative strength. GDX relative to the S&P made a 21-month high and relative to Gold made a 2-year high. 

Both GDXJ (juniors) and the HUI (miners only) still have room to go before reaching their 2016 highs.

In fact, both are facing some immediate overhead resistance. For GDXJ which closed at $39.50, that resistance is at $40-$41. For HUI which closed at 211, that resistance is at 220. 

The support levels are $36 for GDXJ and 195 for the HUI. 

If Gold and Silver maintain current levels, then the immediate bias remains higher and GDX could soon test its 2016 high.

GDXJ and HUI have roughly 30% upside to their 2016 highs. Such a move probably requires a move in Gold to at least $1525/oz. 

However, if Friday was the start of a correction then GDX could test $26 and GDXJ could test $36. 

For investors in the juniors and seniors, continue to hold winners. If the sector corrects, then look to take advantage of that weakness. If metals and shares maintain these levels then focus your capital on fresh opportunities and value plays that are not overbought or extended.

Jordan Roy-Byrne CMT, MFTA