After Gold’s Slide, What Happens To Miners?

After gold came down hard last week, it might be in for a short pause and corrective upswing. What will the yellow metal’s next chapter bring for the miners? How high can they go if gold rallies from here?

As gold recently moved very close to my approximate target of $1,700, the senior miners (GDX) ended Friday’s (Feb. 26) session $0.13 above my initial downside target of $31. And while an eventual flush to the $23 to $24 range (or lower) remains on the table, a corrective upswing could be next in line.

To explain, if gold can bounce off of the $1,670 to $1,700 range, the GDX ETF will likely follow suit. Thus, while the miners are likely to move drastically lower over the medium-term, a decline of nearly 11% over the last two weeks has given way to short-term oversold conditions.

Please see below:

Chart, line chartDescription automatically generated

Figure 1

Even more precise, if you analyze the chart below, you can see that the GDX ETF has garnered historical support at roughly $29.52. Moreover, the level also coincides with the early-March high, the mid-April low, and the 61.8% Fibonacci retracement level. As a result, a corrective upswing to ~$33/$34 could be the miners’ next move.

Please see below:

ChartDescription automatically generated

Figure 2 - VanEck Vectors Gold Miners ETF (GDX), GDX and Slow Stochastic Oscillator Chart Comparison – 2020

Remember though, if gold does bounce off of the $1,670 to $1,700 range, and the miners are able to ride the momentum higher, ~$33 to ~$34 is where the rally likely ends. From there, the bearish medium-term trend will likely continue, with the miners declining to my secondary target range of $23 to $24.

From a medium-term perspective, the potential head and shoulders pattern – highlighted by the shaded green boxes above – also deserves plenty of attention.

Ever since the mid-September breakdown below the 50-day moving average, the GDX ETF was unable to trigger a substantial and lasting move above this MA. The times when the GDX was able to move above it were also the times when the biggest short-term declines started.

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Disclaimer: All essays, research, and information found on the Website represent the analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong ...

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Erikas Ivan 1 month ago Member's comment

Kudos for your detailed analyses and charts Mr. Radomski, honest and humane information, last week's decline call was brilliant!

Harry Goldstein 1 month ago Member's comment

Good article, thanks for sharing.

Przemyslaw Radomski, CFA 1 month ago Author's comment

Glad you liked it! Thanks!