Gold Miners & Juniors Hit Bottom

I’ve been in this game long enough that I know making declarative statements does not necessarily add value for the reader.

But there is enough evidence to think the gold miners and junior gold stocks have hit bottom. 

Last week we wrote about approaching the bottom, and that was a good segue.

The gold stocks have been approaching a bottom and the price action to close last week gives us some confidence that a bottom could be in. 

The Dow Jones US Gold Mining Index is weighted heavily amongst the largest gold producers, which have lagged the sector in recent weeks.

However, after gapping down last Thursday, the index formed a bullish reversal and on the largest daily volume in the past 7 months. Also, Thursday’s low was a retest of the November 2020 low, and it marked the 38% retracement from the Covid crash low and 50% retracement from the 2018 low. 

A strong bullish candle Friday and a 2.7% gain followed Thursday’s bullish reversal.

(Click on image to enlarge)

Dow Jones US Gold Mining Index

GDX’s low last Thursday nearly touched the 400-day exponential moving average (blue arrow), which, as we noted in past articles, provided support for gold stocks during 2001, 2002, 2003, 2005, 2006, 2009, and 2010. 

Also, breadth indicators, just before the bullish reversal, hit very oversold levels. For the HUI (GDX without the royalty companies), the percentage of stocks above the 50-day moving average hit a low of 4%, and the percentage of stocks above the 200-day moving average hit 20%.  

(Click on image to enlarge)

GDX Daily w/ Breadth Indicators

Meanwhile, GDXJ successfully retested the breakout from the 7-year resistance for the second time. Note that the November 2020 low and last Thursday’s lows were a perfect retest of the peaks in 2013, 2016, and 2020.

The short-term breadth indicators show a positive divergence this time, while the long-term (percentage of GDXJ stocks above the 200-day moving average) is very oversold at 26%. 

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