Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Gold And Miners Not In Santa's Bag

By Sunshine Profits (Przemyslaw Radomski, CFA)CommoditiesDec 21, 2020 12:56PM ET
www.investing.com/analysis/gold-and-miners-not-in-santas-bag-200548576
Gold And Miners Not In Santa's Bag
By Sunshine Profits (Przemyslaw Radomski, CFA)   |  Dec 21, 2020 12:56PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Do you feel the Christmas spirit when it comes to the yellow metal and miners? Because we don’t. Multiple signs over the past few days point to bearish weeks ahead for gold and the gold miners. The VanEck Vectors Gold Miners ETF (NYSE:GDX) – the most liquid vehicle for investors and traders to gain exposure to gold mining companies – is indicating that things are only about to go downhill from here, and a lack of action from options traders only serves to confirm that.

Despite rallying by 8.7% over a three-day stretch, the GDX traded sharply lower on Friday (Dec. 18), and yet again, failed to recapture its 50-day moving average (unlike gold). Moreover, GDX also closed below its early-December intraday high, while the GLD (NYSE:GLD) ETF remained above its analogous price level.

GDX Gold Miners Chart.
GDX Gold Miners Chart.

The relative weakness (miners underperforming gold) supports the following bearish thesis:

While gold corrected about 61.8% of its November decline, gold miners declined only half thereof. In other words, they underperformed gold, which is bearish.

The GDX ETF moved to its 50-day moving average – the level that kept its rallies in check since early October. Can miners move above it? Sure, they did that in early November, but is it likely that such a move would be confirmed or followed by more significant strength? Absolutely not. Let’s keep in mind two things:

  1. Back in early November, the GDX moved above the 50-day MA, when gold did the same thing, so if the GDX wanted to rally above this MA, it “should have” done so yesterday. It was too weak to do it.
  2. The early-November move above the 50-day MA was invalidated in just two days.

Moreover, please note that the performance of the GDX ETF from late-November to now looks like an ABC correction. This is not a bearish sign on its own, but it fits other indications described today and this week in general. It increases the chance that the top is already in or very, very close.

Another important development was the spike in volume during last Thursday’s (Dec. 17) upswing. It resulted in the largest number of GDX shares traded since the Nov. 6 top (on days when GDX is positive), and we all know what happened to GDX after Nov. 6 (As a point of reference, the four other highest volume days since the Nov. 6 top coincided with declines of 6.13%, 2.74%, 3.40% and 4.29%).

In addition, options traders aren’t buying GDX’s rally. Despite put options (which profit when GDX declines) trading relatively flat, call options (which profit when GDX rallies) traded at a significant discount last Friday. Please take a look at the table below for details (courtesy of Yahoo! (NASDAQ:AABA) Finance)

Put And Call Demand.
Put And Call Demand.

The lack of demand among options traders is another signal that last week’s rally is unlikely to continue.

Lastly, I’d like to share with you some thoughts on price targets.

How high could miners go? Perhaps only to the previous lows and by moving to them, they could verify them as resistance . The previous – October – low is at $36.01 in intraday terms and at $36.52 in terms of the daily closing prices. No matter which level we take, it’s not significantly above the pre-market price of $35.76, thus it seems that adjusting the trading position in order to limit the exposure for the relatively small part of the correction is not a good idea from the risk to reward perspective – one might miss the sharp drop that follows. Please note how sharp the mid-November decline was initially.

That’s almost exactly what happened – the GDX ETF rallied to $36.92 in intraday terms, and to $36.50 in terms of the daily closing prices. The breakdown was verified in terms of the daily closing prices, which is more important than what happened in intraday terms.

Consequently, the outlook is bearish as it seems that miners are ready for another move lower. There’s still a chance that the precious metals sector would move higher based on a possible short-term decline in the USD Index, but this chance is slim, especially given today’s pre-market decline in both the USD Index and gold.

The next downside target for the GDX ETF is the February top in terms of the closing prices – $31.05.

Gold And Miners Not In Santa's Bag
 

Related Articles

Gold And Miners Not In Santa's Bag

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (9)
New Jazenevd
New Jazenevd Dec 21, 2020 8:35PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Zero rate is substantially more important for gold miners than any charts. However, one could still dig out some old charts from last time when zero rate was established in 2009 and see what happened then. As of now, gold miners are ready to repeat 2009-11 bull run.
Bruce Franszen
Bruce Franszen Dec 21, 2020 8:09PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Just love how people chart a commodity that’s so obviously manipulated. 30 million ounces of silver dropped in a day in early November to lower prices. BIS supposedly changing spoofing the market in March. Asia knows physical gold is hard to get. Months out for physical. Illegal as ***and J.P.Morgan called a criminal enterprise. Congrats! Pull the rubber band back farther! We’ll see what happens. Media is complicit, another reason for exploitation. Pull the handcuffs off and see what’s up.
Charles Sturrock
Charles Sturrock Dec 21, 2020 8:01PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
With the rapid demise of the US Dollar, I see nothing but smooth sailing in to the Land of Commodities, and that includes PMs. My ETFs in miners, PMs and other baskets of commodities outperformed all of my other investments today. I think we are just beginning to see people seeking refuge in hard commodities.
Francesco Lucchesi
Francesco Lucchesi Dec 21, 2020 7:31PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
never seen anything more ridiculous. I would take the CFA designation down if I were you lol
Brad Smith
Brad Smith Dec 21, 2020 6:02PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
"NYSE:GLD" Przemyslaw Radomski, I frequently see you write about this specific gold fund. I've spent quite a bit of time doing my due diligence into GLD. Would you happen to know why there is a clause in the GLD prospectus that states GLD has no right to audit subcustodial gold holdings? The GLD managing organizations sure went out of their way to create this glaring audit loophole. What is the purpose of this loophole? Additionally, the GLD organizations promise that this fund is 100% backed by actual physical gold but yet they staunchly deny retail investors the right to any of their listed physical gold.  I remember there was a highly publicized visit by CNBC's Bob Pisani to GLD's gold vault. This visit was organized by GLD's management to prove the existence of GLD's gold but the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not appear on the most recent bar list at that time. It was later discovered that this "GLD" bar was actually owned by ETF Securities.
Brad Smith
Brad Smith Dec 21, 2020 6:02PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I'm also extremely curious if anyone tried contacting the GLD hotline at 866▪320▪4053 in search of numerical details on GLD's insurance? The prospectus vaguely states "The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody." When I asked about how much of the gold was insured, the representative proceeded to act as if he didn't know and said they were just the "marketing agent" for GLD. What kind of marketing agent would not know such basic information about one of the biggest product they are marketing? It sure seems like they are deliberately withholding information from investors.
Covid Altzheimer
Covid Altzheimer Dec 21, 2020 6:01PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
sounds like someone has personal agenda. After 2 weeks are u gonna delate this artickle chose u are gointo look dumm.
Antonio Ba
Antonio Ba Dec 21, 2020 6:01PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks for your opinion. I strongly disagree, but I’m happy to have read it. I’ll see any pullback as a buying opportunity. Lack of options are normal, as there’s currently (excessive) risko-on sentiment driving the market. That can very easily change!
craig smith
craig smith Dec 21, 2020 4:54PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Radomski...I have a question for you. Is gold in a bull market or a bear market in your opinion? If you say a bear market, I really wonder what the heck you are seeing in those charts of yours...gold is near all time high. If you say a bull market, then you are crazy to keep calling a top in any bull market...gold or otherwise! What's going on in your head?
Manbear Pig
Manbear Pig Dec 21, 2020 2:04PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
This wont age well
Jan Buyle
Jan Buyle Dec 21, 2020 2:04PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
None of his analysis do...
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email