Gold Mining stocks started off the year like a rocket ship. Over the past 20 weeks, the popular Gold Miners ETF (NYSE:GDX) has declined nearly 35%. This is one of the larger 20-week declines in its history. We see an opportunity.
This decline has the Gold Bugs Index (HUI) at a rare price point in the chart below.
This chart is based on monthly closing prices over the past 20 years and shows that a series of support and resistance lines are in play as a “Support Cluster” at (1) above.
This is a key support test for miners, which have declined by nearly 35% lately. If a miners bounce is about to happen, this is where it will start. One of the most influential currencies that impact gold and miners is the Swiss franc. In 2011, we suggested that Gold would be flat to down for years to come due to the pattern in play in the franc. The pattern in 2011 was important for the metals space and we believe that today's franc is just as important as it was back then.
For this trend to change -- for gold and miners to break long-term down trends -- the franc's behavior (testing 15-year support), will send critical clues about the future of gold, silver and mining stocks.
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