Wednesday, March 12, 2014

Gold Is Breaking Out -- Will Gold Miners Follow?

Gold is breaking out today. It's a safe-haven bid -- Treasuries are down in yield and up in price. The yellow metal brushed a session high of $1371.30. We'll need a few more days of closing above $1,360 to confirm it. It would also help if gold miners broke out. As of now, they're lagging. Take a look at the Market Vectors Junior Gold Miners (GDXJ) and you'll see what I mean ...
(Updated chart)

Looking at the chart, you can see that the Market Vectors Junior Gold Miners ETF (GDXJ consolidated since last month. Now, it has popped above that short-term downtrend. I’ve put a momentum indicator on the bottom of the chart called “MACD” – it shows that the short-term trend remains bearish.

The GDXJ could continue to break out. On the other hand, it could also head down to test support.  There are a number of support levels, but the one just above $38 is most obvious.

While GDXJ has lagged gold, I don't think it would move independently of gold.  Therefore, higher gold prices will likely push the GDXJ higher.  If gold goes lower, then maybe we'll see the GDXJ test that support.

A deeper pullback wouldn't be a bad development – it just means we'd get better prices on potential picks. 

And while the broad index is underperforming, there are individual stocks that are performing quite well. I recommended one of them this morning in Gold & Resource Trader.

Good luck and good trades, whatever you buy.

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