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Gold Miners Fail at 200-day Moving Average

Commodities / Gold and Silver Stocks 2015 May 23, 2015 - 10:28 AM GMT

By: Jordan_Roy_Byrne

Commodities

Last week we wrote that the precious metals complex had not broken out yet and had more work to do before it could attempt a true breakout. The metals had some more upside and so did the shares. However, the poor performance of the shares this past week could warn of a larger reversal.


We thought the gold miners could rally up to resistance at the 400-day moving average. Instead of pushing a bit higher, their rally reversed course at the 200-day moving average. Note the action since last summer. The miners had a strong rally up to the 400-dma and later recovered to both moving averages when they were quite close in January. This recent rally did not reach the 400-dma and that signals weakness.

GDX Market Vectors Gold Miners NYSE

The weakness in the shares is a warning sign for the entire complex and could also be a signal that the metals have not bottomed yet. Over the past eight months Gold and Silver have essentially traded in a tight range (except for several weeks). Gold has spent most of that period between $1150 and $1225 while Silver has spent most of that time between $15.50 and $17.50. The metals' failure to extend recent strength could signal a move down to the bottom of those ranges and threaten a breakdown.

$GOLD Gold - Spot Price (EOD) CME
Larger Image

Last week we noted that gold miners would only truly breakout (above their 80-week moving averages) if metals were to surpass their January highs.

I'm skeptical metals will do that on this rebound as their relative performance is weak considering the big drop in the US$. The worst is likely over for the miners but if Gold can't reach or takeout its January high then the miners are at risk for remaining in the range they have been in for the past eight months. Until something changes, buying support and oversold conditions works better than chasing strength.

GDX has 12% downside to strong support and 17% downside to its daily low. Be patient and use support to your advantage. If metals are heading to new lows then it would likely create one last chance to buy miners at fire sale prices.

Consider learning more about our premium service including our current favorite junior miners which we expect to outperform in the second half of 2015.

Good Luck!

Email: Jordan@TheDailyGold.com
Service Link: http://thedailygold.com/premium

Bio: Jordan Roy-Byrne, CMT  is a Chartered Market Technician, a member of the Market Technicians Association and from 2010-2014 an official contributor to the CME Group, the largest futures exchange in the world. He is the publisher and editor of TheDailyGold Premium, a publication which emphaszies market timing and stock selection for the sophisticated investor.  Jordan's work has been featured in CNBC, Barrons, Financial Times Alphaville, and his editorials are regularly published in 321gold, Gold-Eagle, FinancialSense, GoldSeek, Kitco and Yahoo Finance. He is quoted regularly in Barrons. Jordan was a speaker at PDAC 2012, the largest mining conference in the world.

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