Technical Analysis: Gold Breakout & Upside Targets


Gold cleared $1300 early in the week and padded its gains on Friday even amid a bullish weekly reversal in the US Dollar. Gold’s breakout was validated by a strong monthly close on Thursday and then a strong weekly close Friday. As predicted, the miners perked up with the breakout in Gold. GDX and GDXJ gained nearly 6% and 7% respectively for the week. Look for the miners to continue to trend higher as Gold attempts to retest its 2016 highs around $1375/oz.

The miners (GDX and GDXJ) have more immediate upside potential. The daily line charts show two levels of resistance. The first level is around $26 for GDX and $38 for GDXJ while the second level is $28 for GDX and $40-$41 for GDXJ.

While Gold closed well above $1300 at $1330/oz, it faces resistance at the 2016 highs around $1375/oz. The net speculative position has reached 248K contracts or 46% of open interest. As the chart below shows, the 2016, 2012 and 2011 peaks in Gold all coincided with a net speculative position of 55% of open interest. If current trends continue, the net speculative position could reach 55% as Gold tests $1375/oz.

Circling back to the stocks, we see that our mini-GDXJ index, which consists of 26 stocks and has a median market cap of ~$100 Million closed the week at a +6 month high. The exploration juniors have led the entire sector this year and we expect that to continue. The price action is healthy as the index is trading above its 50-day, 200-day and 400-day moving averages which are all sloping higher. The index closed at 206 and should reach resistance at 215-220. A correction from there (perhaps in October) could setup a push to the 2016 high.  

The breakout in Gold through $1300/oz has sparked the miners and juniors and we expect additional gains in the short-term as Gold has room to run. That being said, do note that the net speculative position in Gold is fairly high. It could reach an extreme level if Gold tests major resistance around $1375/oz.   To find out the best buys right now and our favorite juniors for 2018 consider learning more about our premium service.  

Jordan Roy-Byrne CMT, MFTA

Jordan@TheDailyGold.com

Jordan Roy-Byrne

Jordan Roy-Byrne

Contributing Editor

Email: jordan[at]TheDailyGold.com

Jordan on Google+Google+

Jordan Roy-Byrne, CMT is a Chartered Market Technician and member of the Market Technicians Association. He is the publisher and editor of TheDailyGold Premium, a publication which emphasizes market timing and stock selection for the sophisticated investor, as well as TheDailyGold Global, an add-on service for subscribers which covers global capital markets.

Jordan’s work has been featured in CNBC, Barrons, Financial Times Alphaville, Kitco and Yahoo Finance. He is quoted regularly in Barrons. Jordan has been a speaker at PDAC, Cambridge House and Hard Assets conferences. TheDailyGold.com was recently named one of the top 50 Investment Blogs by DailyReckoning. Jordan earned a degree in General Studies from the University of Washington with a concentration in International Economic Development.

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