Jordan Roy-Byrne: As we penn this article Gold is trading below $1180/oz and set to close at its lowest level in six weeks.
Gold is less than 2% from its weekly low of $1158.
It is fairly close to another technical breakdown.
However, the gold mining stocks appear to be bucking the trend and showing increasing relative strength.
It appears likely that the stocks have bottomed relative to the metal and maybe so in nominal terms.
Below we plot various gold miner indices against Gold.
We essentially plot the juniors and large caps from both the US and Canada against GLD.
Not only have these ratios increased in recent months but they have increased in the past few weeks as Gold has declined from $1220 down below $1180.
That is a very important signal of relative strength.
Miners vs. Gold
The price action in nominal terms would have been far more encouraging if the miners had closed near their weekly highs.
The weekly candle charts for GDX and GDXJ are below. The miners are up for the week but failed to hold the majority of the gains.
GDX touched $20.90, which is 7% from its 80-week moving average.
If it could reach that resistance it would mark the third test in the past ten months (after previously no tests in two years).
That would be a strong signal of a transition from a bear market to a bull market.
Weekly GDX & GDXJ
The reasons for the gold miners’ relative strength are unlikely to be temporary.