Gold And Silver Stocks Correction Almost Exhausted, Time To Buy

Introduction

Today, we will take a look at the damage inflicted on this sector by the recent sell-off and try to ascertain just what lies ahead for the precious metals stocks involved in gold and silver mining.

We will commence with look at the charts for gold and silver prices followed by a comparison of gold’s progress versus that of the Gold Bugs Index (HUI) and conclude with what lies in store for the Precious Metals stocks in the medium term.


The 12-Month Gold Chart

The Coronavirus capped gold's progress early this year however it recovered quickly to trade at higher levels than before this nasty virus struck. The technical indicators, the RSI, MACD and the STO are now in the oversold zone suggesting a near term bounce is on the cards and that this correction has ran its course.

Those investors that rely purely on chart analysis they will see this set up as an opportunity to acquire gold at a discount to what gold was a few months ago and venture back into this market sector with the view to acquiring a bargain

The 12-Month Silver Chart

The technical indicators were overbought in August however, as the chart below indicates they are now firmly in the oversold zone due to the price of silver falling approximately $5.00/Oz in a few short months.

Silver is now positioned below its 50dma and above its 200dma which suggests that there is plenty of room to move higher.

It should also be noted that both of these moving averages are heading north which I view as a positive indicator as they suggest that there is support for silver going forward.


A Comparison Chart Of Gold And The Precious Metals Stocks

What we can glean from the chart below is that gold has increased in value by 26.14% over the last 12 months and the PM Stocks have increased in value by 57.82%, so the PM stocks have increased at a speed which is 2.2 times faster than the price of gold.

The Gold Bugs Index: The HUI

The chart below shows that the HUI may have found a base at 320, however, these are volatile times and wild fluctuations are to be expected. The technical indicators on the chart below are now a tad oversold so we could get a bounce from this point.

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Disclosure: I am long physical gold and am biased towards this sector.  Do your own due diligence.

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Linda Willis 9 months ago Member's comment

Thanks for the info.