Gold moving out of the two month consolidation was already the good news because that move reinforced the bullish pattern en route to higher in the months ahead.
But market participants need to exercise patience, and can't expect it to make the next break out almost immediately, it would be expected to make several tries or attempts before the next break out of $1800. It may well dip below a few times over the course of this and next week before a successful attempt, unless of course we get a major catalyst. Until then, we must learn to be patient and realistic in our expectations and be prepared to stomach short term volatility and not be seduced to sell into the volatility hoping to pick up cheaper in the days or weeks ahead, because I have been monitoring the price and can tell you there is great demand each time it drops.
And you really dont want to miss out the big action once the break out happens, just like the previous one. Look at the GDXJ chart below, it is just waiting to break out , which is why I have been positioning in a number of junior gold miners (as highlighted in this thread) ahead of this probable outcome- it may not pan out tomorrow, the day after or the next week or month necessarily but with very measured positions in them, they can go up very swiftly when the day arrives and you won't require significant capital exposure to possibly benefit from the expected above average returns when it does so. An example of that was De Grey Mining (DEG) - in just a week, it put on 40% and CMM (Capricorn Metals) higher by 13.6% in less than a month and poised to head higher. The best part about the 40% 1-week return on DEG, it is just getting started and I am not tempted to trade.
Gold has broken out from a two-month-long consolidation (from $1680 to $1770), but the other precious metals markets have not confirmed Gold’s strength.
The gold stocks (GDX, GDXJ) remain below their May highs while Silver remains below significant, multi-year resistance around $18.75. Silver closed Monday at $18.06.
Furthermore, Gold, when priced against foreign currencies, has not broken out. This move has been driven mostly by dollar weakness.
It is possible other markets could follow Gold higher, but there is work to be done.
Moreover, the breakouts in GDXJ and Silver would be far more significant for the sector.
GDXJ is close to a fresh 7-year high while Silver is close to a new 4-year high. (Click on image to enlarge)
In addition to the above, we should note Gold’s resistance at $1800, where Gold tried and failed three times (in late 2011 and 2012) to reclaim $1900. Gold closed Monday at $1781.
Upon reviewing Gold, Silver, and GDXJ, we can see that no real sector breakout has occurred yet.
The trend is higher throughout the sector, and the fundamentals are strong, but we should temper our immediate expectations for the entire sector.
That does not mean sell or hedge. It just means adjusting expectations until the market gives us a signal either way.
The senior producers are currently lagging, but the juniors (GDXJ) and explorers (GOEX) are performing best. I expect that to continue during and following the next breakout, whenever it comes.
Regardless of where things move, this remains an excellent time to get into quality juniors with the most upside potential. Once the sector breaks higher, many stocks will no longer be cheap.
