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February 13, 2018 | Two Sizzling Charts on Gold

Sean Brodrick

Sean is the natural resource analyst. You can read his thoughts on gold, oil and other natural resources at EdelsonInstitute.com

A two-week rally in the U.S. dollar squeezed gold mercilessly. And many gold investors ran for the exits.

They’re going to miss the next big rally in gold … and an even BIGGER rally in miners. 

Let me show you what I mean in two charts. First, let’s look at a weekly chart of gold …

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This pattern is called an inverse head-and-shoulders. If gold can break the “neckline” of that pattern, it could move to $1,640 very quickly. That would light dynamite under select precious metals stocks.

That’s gold. Now, let’s look at gold miners …

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This is a “candlestick” chart of the VanEck Vectors Gold Miners ETF (NYSE: GDX). It’s a basket of leading gold miners. The candles track the openings, closings and intraday action of the price of GDX.

On the chart, I indicate a candlestick pattern called a “hammer.” It’s quite bullish. Basically, a hammer indicates something (in this case, gold miners) tried to sell off, and then buyers came in to push it higher.

Below the price action is trading volume. You can see that the volume on that hammer was strongly bullish.

Volume confirms price, so we know this rally is real.

And below that is a momentum indicator called “slow stochastics.” This is good for short-term cycles. It looks like a series of waves, right? Well, that wave just bottomed, and looks ready to head higher. This momentum shift could propel the GDX quite a bit higher.

We are obviously looking at a great set-up for a gold miner rally. And if gold can push above that “neckline” on the first chart, this could be the start of something BIG.

Here’s one thing to keep in mind …

China remains the world’s largest gold consumer. China’s total gold consumption rose 9.4% to 1,089 metric tons in 2017. The Chinese lunar New Year starts on Friday, Feb. 16. That could keep a lid on any gold rally, as Chinese buyers go on vacation.

On the other hand, gold likes to make fools of the biggest number of investors. We could see gold rally furiously BECAUSE China is on vacation, so traders there aren’t on hand to stand in gold’s way.

The U.S. dollar is starting to weaken even as I write this. That is the spark gold needs to start heating up. All in all, it’s quite exciting. Keep your eyes on these charts.

And if you’re looking for more hot names for the next gold rally, check out my story about the new Nevada Gold Rush from Saturday.

All the best,
Sean Brodrick

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February 13th, 2018

Posted In: The Edelson Institute

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