Gold And Gold Shares Showing Strength

We’re finally starting to see some hopeful signs for gold via the SPDR Gold Shares ETF (GLD) and gold stocks via the Market Vectors Gold Miners ETF (GDX). In our last update we mentioned that the chasing of precious metals by traders had stopped and that we’d finally got some capitulation in sentiment (calculated from the Twitter stream). This was the first thing we were looking for in order to create an environment where gold could create a durable low.

Now we have our second piece of good news. Twitter sentiment for GDX is signaling that it is ready to attempt a counter trend bounce. This signal is created by the positive divergence between smoothed sentiment and price which subsequently broke above the prevailing down trend in sentiment (green line on the chart below).

Volume on the recent low compared to the April low is also suggesting that GDX is trying to bottom. The high volume sell off in April forced weak holders of GDX to capitulate. In addition, it caused fear even among long term holders. This relieves some of the overhead supply and gives GDX a chance to run up to its 50 day moving average near $31.


Randgold Resources (GOLD) is one of the 50 most active stocks on Twitter. It is showing a better chart pattern than GDX in that it has already made a higher low and is close to both its 50 day moving average and down trend line. Twitter sentiment is confirming the move higher by making lower lows as well.

This is the stock we’re watching for the next positive development for precious metals shares. If GOLD can move above its 50 day moving average and downtrend line with confirming sentiment there is a very good chance that GDX and GLD will follow.

The chart of gold (GLD) isn’t as strong as the precious metals stock charts. It doesn’t have a positive divergence in sentiment, but it isn’t confirming lower lows either. We’d like to see smoothed sentiment move above the zero line on any continued rally. This will show that the bulls are outweighing the bears and that traders on Twitter are accumulating the metal.

A move in sentiment above zero on a rally to the 50 day moving average would be a very good sign for gold going forward.