2014 Resistance Holding Gold Stocks After Brexit
Jordan Roy-Byrne, CMT | Jun 26, 2016 12:39AM ET
What a last 24 hours for markets! At one point gold was up $100/oz, S&P futures were limit down and the British pound was down over 8%! The volatility has subsided, perhaps temporarily and gold settled around $1320/oz with silver settling below key resistance at $18. The miners predictably gapped up but the strength was sold. As miners remain below 2014 resistance we expect gold to retest $1300/oz before moving higher.
The chart below plots the weekly candlestick charts of VanEck Vectors Junior Gold Miners (NYSE:GDXJ) (top) and GDX (NYSE:GDX). The miners gained 5% to 6% on the week thanks to Brexit but note that miners sold off today after testing 2014 resistance. GDXJ, which has resistance at $43-$45 reached $43.76 today before declining and GDX, which has resistance at $27-$28, reached $27.71 before declining.
We should also note that the miners remain stretched when viewed through the lenses of history. Specifically, Brexit pushed the rebound above the 2008-2009 rebound.
Given the action in the miners today and their historically overbought condition, coupled with gold selling off from much higher levels, I expect gold to retest $1300/oz next week. A retest is only that and nothing more. While gold has technically not formed a reverse head and shoulders bottom, it nevertheless has a potential measured target of $1550/oz. There is some resistance at $1330 and $1380 to $1400. However, there is very little resistance from $1400 to $1550.
News events rarely change market trends as the market typically leads news but Brexit could be an indication of a new bullish development for precious metals. That would be the long-term disintegration of Europe which would be very negative for the euro, the world’s second largest currency. This news propelled gold through $1300 and could be the catalyst to take it towards $1400 over the next few months. Meanwhile, the gold stocks could back and fill just a bit before again testing 2014 resistance levels.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.