From the Desk of Ian Culley @IanCulley
With the dollar beginning to rise, gold and silver are coming under some selling pressure.
Nevertheless, these shiny rocks and their related mining stocks are hanging tough.
Instead of getting bent out of shape, I plan on using the recent bout of selling as an opportunity.
When markets come under pressure, it’s time to identify the most resilient names.
Why?
The strongest stocks will likely lead the next leg higher.
Some call it the “beachball” effect. These names tend to rip higher after sellers fail to submerge these stocks.
And I have a potential beachball of a gold mining stock I want to share with you today…
First, it’s a range-bound mess for gold, silver, and platinum futures.
Here’s a look at an equal-weight index of those three metals:
The index currently is turning lower, retesting the lower bounds of a multi-year range.
As long as it remains within “the box,” I have to give precious metals the benefit of the doubt.
And as long as it remains messy, I want to continue to lean on the strongest names out there – on absolute and relative terms.
To be clear, that’s always the case – you want to buy the strongest and sell the weakest.
But you want to choose wisely, now more than ever.
There will be a time when you can’t miss when it comes to buying gold mining stocks.
We’re not there yet.
Until we find ourselves in a more favorable environment, we want to lean on mining stocks such as Gold Fields $GFI:
Is it range-bound?
Yes, it looks quite similar to gold as it trades in the middle of a multi-year range.
But it’s not breaking down, and it’s already broken out of a decade-long base relative to the Gold Miners ETF $GDX.
GFI illustrates the definition of resilience and relative strength.
Perhaps now isn’t the time to get long, but I don’t hate it above 7.50. If and when it breaks above 16, I like buying strength with an initial objective of 25.
That’s it for today.
If anything, remember it’s messy across the precious metals space right now.
Therefore, the game plan is to remain selective until the uptrend becomes more pronounced, buying the strongest and most buoyant names, such as GFI.
Thanks for reading! As always, please let us know what you think.
Click here to watch this week’s Gold Rush Video:
And be sure to download this week’s Precious Metals Report below!
Allstarcharts Team
