Gold Miners Look Good Here ... Guess What Looks Better?

Here is a series of charts I am watching.

First, the US Dollar, as tracked by the PowerShares DB US Dollar Index Bullish Fund (UUP). Despite the fact that it is rallying today, it has fallen below its trendline of the last six months. Its rally seems to be stagnating.

(Updated chart)

And gold still can't get out of its own way. It is down today as well.

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But take a look at the Market Vectors Gold Miners ETF (GDX).  You can see that miners are recovering nicely ...

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We don't want to give this the "all-clear" yet because the metal isn't following ... yet. Now, miners usually lead the metal. So, it's likely that gold miners are putting in a bottom and the metal will follow. This seems more likely when you see that the miners seem to have put in a double bottom ...

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I think that looks pretty bullish for miners. The metal should follow.

That said, there's something that's acting even more bullishly. And that's energy producers ...

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Even though the Saudis have added enough extra production to equal HALF A BAKKEN per day, oil prices are recovering nicely and oil producers right along with it. That kind of action in the face of what should be bearish news is very bullish.

Just some things to keep in mind.

Fascinating Chart Action on Dollar and Gold

I find the chart action in the US dollar (as tracked by the UUP fund) and gold (as tracked by GLD) fascinating. I'm kind of a geek that way, but see if you find it interesting.



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Here's the thing. We can all see the U.S. dollar looks poised to go to new highs. That should happen, unless emerging markets like Russia make a miraculous recovery, Japan finds a recovery concealed in its kimono and Europe finds that recent deflation is all just a bad dream.

However, while the dollar pushes to new highs, gold is off its lows. It hasn't even tested low it made back in November. How do you like them apples? What does it mean? Hmm...

Friday Afternoon Charts of Gold, Copper, Nat-Gas and More

Yesterday, I recommended Gold & Resource Trader subscribers grab three rounds of gains. They were nice gains, especially considering the short time frame.  Now, we'll have to see what happens next. Will I regret selling, or will we get a buying opportunity?

Here are some charts I'm watching ...

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Tumbling US Dollar Boosts Gold -- But that's Just ONE Factor

Here's an updated chart of the Powershares DB US Dollar Index Bullish Fund (UUP), which I've been following all week.  The breakdown in the UUP and the US dollar gives us two targets ...

(Updated chart)

The dollar is falling because downbeat economic reports -- industrial output, unemployment claims, retail sales -- cast doubt that the Federal Reserve will keep scaling back its QE stimulus at each policy meeting. So it is likely that the U.S. dollar will move lower, and UUP will fall to one of thse target supports I've noted on the chart.

The question becomes, how high will gold go by the time the U.S. dollar bottoms?

Importantly, the U.S. dollar is only one driver in gold now.  A more important driver is demand from China. Another more important driver is sellling by ETFs that hold physical gold.

So let's go over those.

After a massive, record year for Chinese gold demand in 2013, Chinese demand for gold in January was again staggering. SGE data shows that withdrawals from the Shanghai Gold Exchange vaults in January 2014 accounted for 247 tons. This is an increase of 43% compared to January 2013. It’s also more than monthly global mining production and an all-time record. And this is happening even as Chinese gold production climbs to an all-time record.

Assets in the SPDR Gold Trust (GLD), the biggest bullion-backed exchange-traded product (ETP), rose by 0.9% to a two-month high of 806.35 tons earlier this week, then dropped to 801.25 metric tonnes on Thursday. Still, it was the highest level since December 20. Holdings are 1.2% higher this week and headed for a third 5-day period of advances, after losing 41% in 2013. A total of 553 tons was withdrawn from the GLD last year.

In the last month, says Julian Phillips of GoldForecaster.com, there have been no sales from the GLD and more than 500K ounces of purchases. “This is tremendously significant because sales of physical gold from these U.S. gold ETFs and from the leading U.S. banks totaled 1,300 metric tons in 2013 ... This formed a key source of supply for gold. All of it went east to Asia never to return again.”

And Mining.com reports that the last time ETF investors were this bullish was on October 4, 2012 when GLD recorded 9 tonnes of inflows. At the time gold was trading just under $1,800 an ounce. The strong inflows are in stark contrast to the one-way bet gold became among ETF investors: GLD recorded only 17 days of inflows all of last year and almost 540 tonnes left the fund.

Remember, gold doesn't have to go up. And if you believe Ted Butler, JP Morgan's manipulation of the gold market is blatantly obvious.

However, all that said, it sure looks like bullish forces are lining up for precious metals and miners right now. Here's an updated version of a chart I posted earlier this week ...

(Updated chart)

If you want to read more about the irresistible forces driving gold, read my column from Investment University this week. 

And for more chart action, I recommend this post at the GoldCore.com blog.

Remember, do your own due diligence before investing or trading in anything. Good luck next week.

Best wishes,

Sean

Gold Miners Are Back in a Bull Market

In a previous post, I told you how gold has to get above $1,327 to signal a new bull market. But gold miners aren't waiting. That's probably because the smart funds know leveraged miners trading at dirt-cheap prices when they see 'em.

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Looking at the weekly chart, you can see that the Market Vectors Gold Miners fund (GDX) has broken its big downtrend. The ADX indicator on the bottom shows the bearish trend is over. The move is coming on nice volume, too, which I'm not showing on this chart because it's busy enough (maybe next time). 

The next target for the GDX is in green -- a nice move, and it could come quickly.

Let's take a look at a chart of the SPDR Gold Trust (GLD) while we're at it ...

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I've added an indicator called the $BPGDM (Gold Miners Bullish Percentage Index). We need the BPGDM to rise above 30 for a confirmed bullish signal. It's not always perfect -- we got a false signal in July of last year. But combine that with the double bottom in gold and miners, and the positive shift in momentum, and I'd say gold's odds of getting back into a bull market are better than average.

Now imagine me saying that in a Crocodile Dundee voice after I throw a knife into a wall. There ya go.

Interestingly, this is coming as the US dollar index bounces from the bottom of its channel, as I predicted it would in a post earlier this week.

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Since gold is priced in dollars, a bounce in the dollar, as seen tracked by the UUP here, SHOULD weigh on gold prices. That's not happening, at least not yet.

And the pullback in gold miners this morning was remarkably brief. A lot of hot money wants in, methinks.

The proof will be in the pudding. But the two new precious metals positions I recommended to Gold & Resource Trader subscribers last week are already racking up nice open gains. In fact ALL the Gold & Resource Trader recommended open gold and silver miner positions are showing nice open gains. I think there's more to come. Stay tuned.