Gold Retest Coming
Jordan Roy-Byrne, CMT | Nov 11, 2019 02:38PM ET
Gold and silver stocks have held up decently during the correction in precious metals, which is now in its third month. However, as we mentioned last week, the bugaboo has been the relatively high net speculative position in gold, which has not changed much despite recent weakness in the sector.
Technically gold cracked last week and the downside momentum coupled with the relatively high net spec position argues that gold is headed for a retest of the summer breakout.
Gold closed the week at $1463 with a net speculative position (as a percentage of open interest) of 45.9%.
As the chart below shows, the net speculative position often hit lows at or below 30% during corrections in bull years. Look for gold to test support at $1370 to $1400 as more spec longs cut their long positions.
A Retest For Gold Means A Retest For The gold stocks/h3
Below we chart GDX and GDXJ.
GDX (NYSE:GDX) has a confluence of strong support at $24.50 to $25.00, which was the breakout point. GDXJ has a confluence of strong support in the $34s.
As I touched on last week, the relative strength in the silver stocks (NYSE:SIL) and the strong breadth in GDX (NYSE:GDX) (its advance decline line made a higher high on Oct. 31) has been encouraging. Time will tell if these positives remain in place should the sector retest these key support levels.
Pay attention, because the market should provide us with some good, low-risk opportunities over the next few weeks. There is one junior producer we have our eyes on buying very soon.
We have been focusing on identifying and accumulating quality juniors with significant upside potential in 2020.
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.