From the Desk of Ian Culley @IanCulley
Gold mining stocks are the play.
Why?
Because they’re working!
In a market overrun with whipsaws and failed moves, our gold mining trades are holding their breakouts and reaching our initial targets. Not many market areas can make that claim.
And when you consider they’re outperforming the S&P 500 and the physical metals, it’s hard not to like these names.
Especially as gold and silver run into logical levels of resistance…
Gold is knocking on the door of all-time highs after gaining 13% over the trailing five weeks:
A pause at current levels makes sense – and is likely underway, as a bearish momentum divergence indicates waning strength.
That doesn’t change my bullish outlook for gold. Rather, my view simply turns neutral over the near term.
It’s the same story for silver.
Gold’s crazy cousin is running into a logical level of overhead supply at approximately 26.
In 2020, we wanted to feed the ducks at 26, as it marked a key retracement level and a shelf of former lows.
And here we are again, almost three years later.
I still like trading silver from the long side, but a healthy consolidation over the coming weeks is warranted after its recent rally.
It’s not the appropriate time to enter new positions in these metals – at least not until they hit new highs.
The looming supply for rocks is all the more reason to turn your attention to stocks – gold and silver mining stocks.
It doesn’t hurt that mining names are outperforming the broader market – and now gold!
Check out the Gold Miners ETF $GDX relative to the Physical Gold ETF $GLD:
GDX is breaking to fresh 10-month highs versus the shiny yellow metal as it carves out a multi-year base on relative terms.
This is one more piece of bullish evidence supporting potential further strength from these stocks. But a breakout from the mining bellwether, Newmont $NEM, would be the icing on the cake.
NEM is carving out a potential reversal pattern below a shelf of former lows at approximately 55.50:
That’s my level.
If and when NEM reclaims that critical polarity zone, I like it long toward the 2022 high of 86.37 (over longer time frames).
An upside resolution and fresh 52-week highs for this gold mining bellwether would confirm the bullish action underway, adding confidence to a market area already riding high.
Whether NEM breakouts out next week or next month doesn’t impact my bullish bias.
Gold and silver mining stocks are holding their breakouts as their underlying rocks hit former resistance. They’re also outperforming the broader stock market and the physical metals they mine.
One thing I know for certain – the strongest trends not only do well on absolute terms but also outperform their alternatives. I imagine that trend picks up pace once NEM joins the pack.
Nevertheless, there are plenty of buying opportunities across the space to keep us all busy until it does.
Stay tuned.
Thanks for reading! As always, please let us know what you think.
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Allstarcharts Team
