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Monthly Charts Signal Lower Precious Metals Prices In October

Published 10/02/2016, 01:18 AM
Updated 07/09/2023, 06:31 AM

The trading month doesn’t always end on a Friday but when it does we like to take a look at the monthly charts. Generally, I prefer daily and weekly charts because they have more data points. However, monthly charts carry more significance than weekly charts which carry more significance than daily charts. You get the point. One reason and a good reason we expect the current correction to continue is the sector monthly charts.

The chart below plots the monthly candle charts of the VanEck Vectors Gold Miners ETF (NYSE:GDX) and VanEck Vectors Junior Gold Miners ETF (NYSE:GDXJ). Earlier this year the miners exploded above their 20-month moving averages and into a new bull market. They were trading at three year highs before a bearish reversal in August that reversed the entire gains from July. September saw a recovery but failure to hold most of those gains. This tells us that selling pressure remains present and miners will likely see lower prices in October.

 GDX:GDXJ Monthly 2011-2016

The metals show a similar picture. Markets moved well above their 20-month moving averages but the August candle engulfed July’s candle while September recovered only to a small degree. That implies lower prices in October. Gold has support around $1290 while Silver has support near $18. Like the miners, the metals remain a healthy distance above their rising long-term moving averages.

Gold:Silver Monthly 2011-2016

The monthly charts and in particular the action of the past two months leads us to believe lower prices in October are more likely than not. The monthly charts obviously take more time to develop (we have to wait an entire month) but they are the most significant.

Time will tell but we see the potential for an important low in October. Traders and investors are advised to wait for lower prices and an oversold condition. We will focus on opportunities scattered amongst individual companies.

Latest comments

Why nobody talks about supply and demand in gold mining industry? The bull market started in 2000, ended in 2011. Bear market lasts much longer than bull market, however, we won't see the low of 2000.
charts are manufactured by our caring friends the banksters just to take more of our money so they can buy another yatch in the hamptons, duh
October is politically charged, so would not surprise me to see a flight to safety.
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