Gold: Subtle Divergence In A Sea Of Gloom
Tommy Humphreys | Oct 28, 2014 04:34PM ET
Total assets in Gold exchange traded products reached fresh 5-year lows last week:
In addition, total assets in the Rydex Precious Metals Fund (an excellent gauge of retail investor sentiment) reached 12-year lows Monday as investors continue to flee the space in disgust.
Hanging Tough
It is interesting to note that as funds continue to flow out of the precious-metals space, both gold and gold-mining shares (as represented by (ARCA:GDX)) are not making new lows. Gold remains well bid above $1200 and GDX continues to hang tough with major support near $20. It is a subtle, but potentially meaningful bullish divergence – the space is exhausted with selling and smart money buyers are stepping in at support as weak hands capitulate.
Friday’s close (continued mutual/hedge fund tax loss selling into the October 31 fiscal year end) and the $20 level on GDX now take on added importance; a reversal back above the $22 level on a weekly closing basis would be a constructive sign that the worst is behind us, whereas a breakdown below $20 on a weekly closing basis could signal that prices will have to fall to at least the 2008 lows.
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