Where Do Gold Stocks Go Next?

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Dr. Jeffrey M. Kern has been an academic clinical psychologist at Texas A&M University and the University of Nevada – Las Vegas since 1979, specializing in the measurement and prediction of human behavior.  

Born in New York City, Dr. Kern’s family suffered severe financial losses during the stock market decline of the mid-1970s and his small childhood savings were then ravaged by the inflation of the late 1970s, spurring him to spend years researching the prediction of the gold market. His subsequent 22 years of experience in trading the precious metals have been guided by his most profound discovery, the SKI indices.  

Although he has received various professional awards, including being named the 1998 Nevada Psychologist of the Year and serving as the Director of two doctoral programs in Clinical Psychology, his unique mathematical accomplishments in predicting the gold market have not, as yet, been recognized by the mainstream financial media or the societies for technical analysis. Dr. Kern’s most prominent assets are his wife of 30 years (Lisa) and his two sons (Joshua and Douglas). 

Prediction is the essence of science, and although financial publications regularly dismiss the possibility of predicting market movements, Dr. Kern’s ambition is to indisputably demonstrate the fallacy of such assertions. The ability to predict human behavior, evaluated via the objective and error-free measures of daily financial markets, is his intellectual and personal passion.  

He invites you to join him in his profitable, scientific, and personal journey.

Jeff’s Website, Subscription Information & Contact Info

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Contact: jeff@skigoldstocks.com

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Gold & Gold Stocks Nearing a Big Move

Gold and especially gold mining stocks rebounded on Wednesday and trended higher into the weekend. This is giving some investors renewed hopes that the bull market that began roughly 18 months ago is about to reassert itself. We cannot know for sure yet but what we can say is precious metals are nearing a big move. Gold and gold stocks have traded in tight ranges which will compress further while volatility indicators approach multi-year lows. This is the setup for a break and then a powerful move with increasing momentum and volatility.

First let’s take a look at Gold. Its weekly bar chart is shown (going back 10 years) with two volatility indicators at the bottom. One is the GVZ contract and one is the average true range (ATR) indicator. The ATR indicator is at a 10-year low while GVZ is near an 8-year low.     Gold has tested major resistance ($1300) twice and failed both times. If Gold loses its 2017 uptrend (support is around $1230) then it is susceptible to an accelerated decline with increasing volatility and momentum. On the other hand, if Gold could bust through $1300 and then consolidate around $1350, it could setup that anticipated breakout through $1350-$1375.  

Turning to the gold stocks, we plot a 10-year bar chart of GDX along with the ATR indicator and the bollinger band width for two periods (20 and 40 weeks). These volatility indicators are trending down and approaching multi-year lows. This is not a surprise as GDX has traded in a tighter and tighter range since January 2017. Specifically, GDX has traded in a descending triangle pattern which, if GDX breaks $21 to the downside has a downside target of $17. The bullish outcome would entail GDX rallying to $25 and then breaking higher after a consolidation.

The bulls are cheering this latest rebound but they have a lot more work to do if the next big move is going to be higher. First things first, Gold needs to break $1300 and GDX needs to retest $25 again. The short-term trend could be higher now but until the Gold sector can attain those marks then the bias for the next big move (due to among other reasons the relative weakness in Silver and gold stocks) should remain to the downside. That is why we remain cautious. For professional guidance in navigating this sector consider learning more about our premium service including our favorite junior exploration companies.

Jordan Roy-Byrne CMT, MFTA

Jordan@TheDailyGold.com

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TheDailyGold Premium Update #523

Saturday evening we published TDG #523, a 27-page update which included an intro report on one of our favorite nanocaps. This company currently has a US market cap below $20 Million and it has a deal with a major company who is moving one of its projects forward. From a few months ago to early 2019, this company could (along with its partner) invest a total of US $8.2M into its projects. That is a serious amount of capital for a tiny, nanocap company. This stock made a big move in 2016 but has since given most of it back, lowering the risk for any speculators who want to invest alongside a major.

Consider a subscription today as we can help you avoid losses and sidestep trouble. Our work will inform you as to what juniors we intend to buy, at what prices and when.

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TheDailyGold Premium Update #522

Saturday evening we published TDG #522, a 34-page update which included, among other things, several pages of Q&A and a lengthy report on a company has become extremely oversold recently. We analyzed the company and projected price targets at $1050 Gold and $1550 Gold near the end of 2018 and a higher Gold price in 2019.

We reiterated our bearish posture on the sector. Its hard to think otherwise after considering technicals and fundamentals. We think the sector is at risk of a potential dump lower over the next month. However, if our favorite companies became really cheap and oversold, we’d accumulate around those lows, even if we felt the sector could go lower later in the year.

Consider a subscription today as we can help you avoid losses and sidestep trouble. Our work will inform you as to what juniors you should be buying, at what prices and when.

Click Here to Learn More & Subscribe to TheDailyGold Premium

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Return of the Gold Bear?

It was exactly one month ago we discussed our posture as a “bearish Gold bull.”

The gold mining sector hit a historic low nearly 18 months ago but this new cycle has struggled to gain traction as metals prices have stagnated while the stock market and the US Dollar have trended higher. Unfortunately recent technical and fundamental developments argue that precious metals could come under serious pressure in the weeks and months ahead.

First let me start with Gold’s fundamentals, which turned bearish a few months ago and could remain so through the fall. As we have argued, Gold is inversely correlated to real interest rates. Gold rises when real rates fall and Gold falls when real rates rise.

Real interest rates bottomed in February and have trended higher ever since. As we know, the rate of inflation has peaked and is declining. Meanwhile, the fed funds rate has increased while bond yields have remained stable. The real fed funds rate and the real 5-year yield have increased by 1% in recent months. If inflation falls by another 0.5% and the fed funds rate is increased by another quarter point, then the real fed funds rate would be positive by the end of the year. That would mark a 2% increase inside of 10 months.

Turning to the technicals, we see that Gold is starting to follow Silver’s lead. Silver is very weak and headed for a test of $16/oz. Last week Gold formed a bearish reversal at major resistance ($1300/oz) and closed the week in the red and even below its April high. If Gold breaks its 2017 uptrend then it is likely to retest the $1125/oz level. There will be rebounds along the way but both metals are at serious risk of retesting their bear market lows.

The miners, which have lagged the metals since February could be close to a technical breakdown. Since February GDX has consolidated within a descending triangle. The candlestick action of the past several weeks is favoring a break of support at $21. The measured downside target would be $17. Meanwhile, GDXJ has outperformed in recent weeks as the rebalancing has come and gone. It may continue to outperform but if the sector breaks lower it will not be spared.

Both the technicals and fundamentals argue there is increasing downside risk in the precious metals sector. Real interest rates are rising and as the rate of inflation continues to fall, Gold will come under pressure even if nominal rates don’t rise. From a bird’s eye view, the price action in Gold and Silver so far this year is corrective, meaning it is a correction of the sharp downtrend seen in the second half of 2016. There is a strong risk of that downtrend reasserting itself and metals ultimately retesting their bear market lows before the end of this year. With respect to the gold stocks, …read more

Flash Update: Optionality Plays

Early Tuesday morning we emailed a 3-page flash update to subscribers. We covered the current state of optionality plays. They have sold off quite a bit already. Are they a buy yet? Which criteria should we use to select an optionality play?

We answered these questions and reiterated our favorite optionality play which could have 400%-500% upside from these levels to $1500 Gold.

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TheDailyGold Premium Update #521

Saturday evening we published and sent a 34-page update to subscribers. In this update we highlighted the downside risk in the sector and the potential for imminent declines. We have been bearish and cautious for a few months (though we called the May bounce) but Gold has trended higher and some miners have held up quite well. In our view, the present setup could lead to losses in the coming weeks.

The outlook for Gold beyond the next few months will depend on the Fed hike cycle and its end. If miners get really oversold in the next month then it would lead to a good bounce. But the bounce won’t be sustained if the Fed hikes in September and December. There are some similarities to the Fed cycle in 1999-2001 and the cycle now. In short, the next significant low in precious metals could be around the time of their last hike for this cycle. Will it be June? September? December? Right now, the Gold market is hinting it probably isn’t June.

Consider a subscription today as we can help you get positioned in the junior companies with significant upside potential at reasonable entry points. This is exactly our plan in the months ahead. We discuss and cover what we are actually buying, unlike the majority of our competitors.

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Gold Breakout? Not Yet.

Traders and investors noted and celebrated Gold’s alleged breakout from a its downtrend that began in 2011. Tuesday Gold closed at $1297/oz after nearly touching $1299/oz. Gold appeared to break its downtrend on the many charts that made the rounds. However, upon further inspection, there was no breakout from the 6-year downtrend on the weekly chart nor is Gold likely to sustain its strength in the days ahead.

First, let’s take a look at Gold’s weekly line chart on both a log scale and normal scale. Weekly charts are more significant than daily charts. We can see (in the following chart) that Gold has not come close to breaking the downtrend line that began in 2011. That trendline resistance comes into play at much higher levels. Gold has appeared to break the trendline resistance from the 2016 highs but it could prove to be a false breakout if Gold can’t close above $1300/oz.

There are two things to highlight in the next chart. First, on the weekly chart we can see that Gold closed the week well off its high of the week. A bar or candle chart shows a weekly reversal. Gold closed the week below its April closing high and even below last week’s close! Second, the real important resistance for Gold is not the trendline from the 2011 peak but $1300/oz as well as the peaks from 2013 and 2014 when Gold began its attempt to bottom. Gold will only be in the clear when it can takeout $1350-$1375/oz.

The miners certainly aren’t supporting the bullish case for Gold. Both GDX and GDXJ have made lower highs since January and by weeks end they erased all the gains from Tuesday’s surge. Their negative divergence to Gold remains well intact.

Meanwhile, in the charts below we focus on the junior sector, which is our preferred sector for investment. TDG Junior Index is an index of 55 junior companies. Over the past few months this index has failed thrice at a declining 50-day moving average. If the index cannot takeout Tuesday’s high then it is at risk of falling at least 10% to its May low. TDG Mini Index highlights the bottom half of the index which has been the strongest part of the junior sector. This index failed at its 200-day moving average in April and has failed at the now declining 200-dma thrice in the last few weeks.

Gold’s failure at $1300 and weekly reversal have nullified any apparent breakout on the daily chart. Moreover, some traders and investors are neglecting the more important resistance levels of $1300/oz and the $1350-$1375/oz which stem from the 2013 and 2014 tops. The weekly reversal in Gold coupled with the continued poor performance from the gold stocks suggests a real breakout in Gold is not yet in the cards. The positive aspect is this failed breakout could lead to a selloff and ultimately lower risk entry points in a number of juniors. We will exercise …read more

TheDailyGold Premium Update #520

Late Saturday evening we published and sent a 32-page update to subscribers. In this update we reiterated our near-term bearish outlook due to the continued relative weakness in gold stocks and Silver as well as a sudden increase in bullish sentiment in Gold as Gold nears very strong resistance. We also noted the potential for a snap-back rally in the reflation theme, which is extremely oversold. That could pressure Gold in the short-term.

We also noted the importance of the Gold/Equities ratio which could be nearing a major move before the end of the year. A correction in the stock market could mean there are no more rate hikes (other than June) for the rest of the year. That would be a bullish catalyst for that ratio and gold stocks. However, a continued rise in the stock market with no further deterioration in economic stats, could lead to multiple rate hikes which would pressure precious metals for the rest of the year.

This update included subscriber questions answered (p8-10) and updates on a handful of companies (p5-7). One company holds a district scale land package in a good jurisdiction. They are trading at a sub $50 Million market cap and we think they have 3-5Moz potential in 3 years. Another company has corrected recently but boasts strong potential for 3M oz Au. It has under a $100M market cap. Another one has been hurt by the GDXJ rebalancing. We think the stock has 5-fold potential in the next 2-years if Gold returns to $1800/oz. We noted one of our recent buys and favorites which reported good news recently. It remains extremely cheap and has 10-bagger potential. Finally, we noted a company very high on our watch list, which has a sub $15 Million enterprise value but has a joint venture with a major.

Consider a subscription today as we can help you get positioned in the junior companies with significant upside potential at reasonable entry points. This is exactly our plan in the months ahead. We discuss and cover what we are actually buying, unlike the majority of our competitors.

Click Here to Learn More & Subscribe to TheDailyGold Premium

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Gold Miners Weak but not Oversold

If looking at Gold only in a vacuum, it looks good. Its uptrend since the start of the year remains intact and it has pushed above its 50 and 200-day moving averages. It closed the week at $1280/oz and could test $1300 next week. But looks can be deceiving. Considering the US Dollar index closed at a 7-month low today, Gold is lagging a bit. Moreover, both Silver and the gold miners have not confirmed Gold’s recent rise. In fact, the miners are lagging the metals “bigly.” At the moment the miners are not so oversold but a reversal in Gold could be the catalyst that pushes miners to oversold extremes.

Both gold and silver miners are sporting another bearish divergence. The early April divergence (new highs in metals but not in the stocks) preceded a selloff into May and now we must be on guard for the May divergence causing a selloff in June. Since the middle of May both Gold and Silver have climbed higher while the shares (GDX, SIL) have not. The shares are again lagging the metals while Silver is again lagging Gold. These divergences are an obvious warning sign.

    

The miners and even the juniors are not so oversold at the moment and would be susceptible to losses should Gold form a bearish reversal soon. Here are a few factors to consider. The bullish percentage index (a breadth indicator) for GDX remains at 39%. I would deem anything below 20% as very oversold. Meanwhile, from our 55-stock junior index charted below, 35% of the stocks are trading above their 50-day moving average while 44% are trading above their 200-day moving average. That is a bit high considering the bearish technicals of the index, which remains below falling moving averages and has room to fall before reaching strong support. 

We should note that because of the GDXJ rebalancing a number of “senior” juniors are nearing extreme oversold levels. Considering GDX’s proximity to its 50-day moving average, we estimate that GDXJ could be trading 5% lower than it should be due to the rebalancing. However, aside from some individual companies in the GDXJ, the gold mining sector is not that oversold.    

Given the weakness in the US Dollar and strength in Gold, one would think the gold stocks would be trading materially higher. In our view, the relative weakness in the sector is not an opportunity but a warning that Gold could reverse soon. We’ve seen this movie before and it usually plays out negatively for the bulls. Unless taking advantage of “fishing line” type of declines in individual GDXJ stocks we think it’s prudent to wait for a lower risk opportunity. We continue to wait patiently as we expect lower prices and a good buying opportunity in select juniors at somepoint this summer. For professional guidance in investing in this sector consider learning more about our premium service including our current favorite junior exploration companies.

Jordan Roy-Byrne CMT, MFTA

Jordan@TheDailyGold.com

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