Gold looks to close November near 1-month lows just days from being near 6-week highs. It's not that it has moved a lot, but the range is so tight. The Elliotticians are bearish on Gold here. With the bond market breaking down in price, and yields rising rapidly, Gold appears to want to follow bond prices lower. Then Yen also dropped which is a correlated trade with Gold.
I have been positioning for a bull run in Gold coming into the end of November. Seasonality for Gold in December is good. Obviously, the last two days brings that into doubt. Interestingly, the $USD has traded lower intraday for the last two days as well. That is a bit odd as they usually move in opposite directions.
First, look at GLD to get the price of Gold intraday today. It would be fair to say we are in a sideways trading range for the last two months. However, that is a pretty swift move from one side of the range to the other.
A couple of major concerns on the chart is the MACD rolling over just at zero. Never good! The collapse of Relative Strength in purple to new multi-year lows happened today. That is not the way to attract bullish attention. So GLD looks suspect here after moving to new 6 week highs to start the week.
Looking at the Gold miners, I bought a few last week. Take a look at the GDX in the US and then the following chart will look at the ETF for Canadian Gold miners, XGD.TO.
For GDX in US Dollars, the chart also shows new relative strength weakness. That's bearish. Interestingly, the price of GLD is down 0.88% today, however GDX shown below is only down 0.53%. Miners are behaving better than Gold.
The ratio between the gold miners and gold (GDX:GLD) is a good guide for when to be long the miners. When the miners outperform Gold, this chart is rising and it's usually a good time to be long. I would suggest the move in the last two days wipes out the uptrend that started around the 20th of November.
The Canadian chart doesn't look much different that the GDX in Chart 2. Notice the reversal after pushing to one-month highs.While at this point there is a rising MACD, it needs to hold at this support level in order for that positive divergence to play out. The end result is that the Gold trade has to hold above todays lows both on the GLD chart and the miners, GDX and XGD.TO charts.
The nice part about buying into a flat base is the stop can be placed nice and close. If this is about to break down, a small loss on a failed breakout is just good risk management.
Greg Schnell, CMT, MFTA.