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

The Next Move In Precious Metals

By Jordan Roy-Byrne, CMTCommoditiesMay 05, 2021 12:18AM ET
www.investing.com/analysis/the-next-move-in-precious-metals-200577549
The Next Move In Precious Metals
By Jordan Roy-Byrne, CMT   |  May 05, 2021 12:18AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The rebound in Gold and gold mining stocks has been weak.

Gold hasn’t even hit $1800 yet, and the VanEck Vectors Gold Miners ETF (NYSE:GDX) and VanEck Vectors Junior Gold Miners ETF (NYSE:GDXJ) each sputtered at the first sign of resistance. In addition, their weekly closes have been weak, and they failed to hold most of April’s gains into May.

Monday’s pop aside, there has not been much to be excited about.

From a technical standpoint, Tuesday’s downside reversal reinforces that the oversold rebound in the gold stocks could be over.

The weekly chart below shows GDX has struggled at $36, and GDXJ has struggled at $50.

My chart of leading indicators for the sector reveals the underlying weakness in the sector.

GDX and GDXJ Weekly Chart
GDX and GDXJ Weekly Chart

Sure, gold stocks have outperformed Gold, but their other metrics have been weak.

Even as Gold rallied over $100/oz, the GDX advance-decline line sits at the March low. GDX has outperformed the S&P 500 only slightly, while Gold made a new low relative to the stock market in April.

Gold, Gold/SPX Comparative Charts
Gold, Gold/SPX Comparative Charts

Leading Indicators for Precious Metals

That is not exactly the picture we hoped for if the sector is to embark on a multi-month rally or sustain a rebound. 

Not to beat a dead horse, but precious metals are unlikely to sustain a move higher until the stock market experiences at least a big correction.

The market is focused on the economic recovery and potential for higher nominal yields, which could put a floor under real interest rates. This explains the current struggles in precious metals.

If and when the concern becomes inflation rather than growth, then precious metals will outperform. 

Let’s also keep in mind that precious metals made huge moves that require correction in time and price. Gold gained roughly 65% in only 15 months. Silver gained almost 150% in less than five months. 

These kinds of moves can correct for a year or even two, with the primary trend remaining intact. More time is needed to clear weaker hands and for fundamentals to improve. 

The next move could be a resumption of the correction or a sideways grind.

In the meantime, focus on the companies that can add value and aren’t entirely dependent on rising metals prices, like the majority of the junior industry. Those juniors that can add value over the next year will explode higher when the sector turns and sustains it.

The Next Move In Precious Metals
 

Related Articles

Tim Knight
Miners Break Out By Tim Knight - May 14, 2021 1

The precious metals miners ETF, VanEck Vectors Gold Miners ETF (NYSE:GDX), has a clear breakout from its downtrend: Gold has been struggling since Aug. 6, but if it can manage to...

Jordan Roy-Byrne, CMT
Gold Is Still Dirt Cheap By Jordan Roy-Byrne, CMT - May 14, 2021 2

On a historical basis, gold remains incredibly cheap. It may seem expensive on the surface, trading near $2,000/oz, but the reality is contrary to the perception. Gold is trading...

The Next Move In Precious Metals

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with 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
  • 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.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. 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 (1)
John Miller
John Miller May 05, 2021 1:18AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
GLD isn't gold. It's paper.
 
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