The bears have found a new home: gold mining stocks.
Silver’s breakdown earlier this month raised the caution flag for the entire precious metals space.
Less than two weeks later, gold futures and mining stocks are falling under the wrath of increased selling pressure. Precious metals bears are winning the battle as support levels fall to the wayside.
Meanwhile, the bulls are reluctant to leave without a fight…
Let’s review the recent action in mining stocks.
While I always prefer a price chart, I also like Grant’s moving average tables.
He measures the closing prices of all 30 components of the PHLX Gold and Silver Mining Index $XAU against (above or below) multiple moving averages, from five days at the far left of the table to 250 days at the far right.
This provides an excellent read on trends across multiple timeframes.
Here’s the table heading into the May 5 close:
A sea of green! Sellers hadn’t made their way to these mining names just yet.
Fast-forward a couple weeks, and the study presents a far different picture:
Red dominates the table across shorter time frames, displacing the former positive trends.
I expected near-term weakness to hit these stocks following silver’s breakdown. So, I’m not exactly alarmed. Instead, the neutral near-term bias I have for silver futures simply extends to gold and silver mining stocks.
Check out the Gold Miners ETF $GDX slipping below a critical polarity zone:
My outlook for GDX is neutral at best as long as it holds below 33. That flips higher, of course, if and when buyers step in and drive price above that key level.
Gold mining stocks need more time to base at this stage of the cycle. Remember, gold hasn’t even broken out yet (at least not priced in USD).
That’s not stopping the bulls from repairing the damage in gold futures:
Buyers reclaimed the February pivot highs after briefly losing this crucial level of former resistance turned support last Thursday. While selling persists to start the week, bulls are defending that critical level.
Nothing has changed in terms of my structural outlook for these metals and their related stocks. I still believe the precious metals space is on the cusp of a new secular bull run. They’re simply not there yet.
My strategy remains the same. I’ll continue to monitor key former support levels for silver futures and GDX.
The main difference: I’m now tracking whether these levels will turn into significant resistance.
When it comes to gold, I’m tracking the 1,975 level and the former commodity supercycle highs at approximately 1,925 for potential support.
It’s time to focus on protecting capital as broad selling pressure hits these shiny rocks.
Let me know what you think. I love hearing from you.
Thanks for reading. And stay tuned!
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And be sure to download this week’s Precious Metals Report below!
