Loading ...While this will not endear me to gold bulls, gold was flattened on the FOMC news and is currently down over 1%. The HUI is a bloodbath having fallen 3.25% at this time while the junior-laden GDXJ is being soaked, down 5.55% at this moment.
Incidentally, it does look as if Mr. “gold will be well north of $2000 before the end of this year and silver north of $50” has struck out once again. I am not trying to rub salt into a wound – I am merely repeating something I have said here repeatedly in an attempt to teach and WARN readers – DO NOT FOLLOW ANYONE who claims to know in advance where a market is going. Here is the truth – THEY DO NOT KNOW in spite of their hubristic and reckless claims to the contrary.I honestly believe we going to see some junior miners disappear before this is all done. Be careful what you buy out there if you want to be a “hero contrarian” and start buying junior miners.
Take a look at this ratio chart briefly comparing the HUI to the price of gold and creating a ratio. It hit a level that was last seen – are you sitting down as you read this – December 2000! That is FOURTEEN YEARS AGO.
I said this before in a recent post and will say it again now, either the price of gold is too high and needs to fall further or the mining stocks are undervalued against the price of gold and need to move higher. Based on what I am seeing today, I see nothing to persuade me any differently. I still think gold is heading lower. Either that or some of these mining companies are history.
Notice on the gold chart that the metal has fallen to the support zone marked near the $1220-$1210 level. It is currently BELOW that level. the way it is trading at the moment ( and of course this could change) it does look as it a test of $1200 is coming. The reason I say that is because the price has fallen well below the middle line of the Bollinger Band indicator with the lower band sitting near $1197.
The ADX is still choppy suggesting that this move is a move back to the bottom of a wide range that has been in place for nearly a month now. However the clear break to the upside of the -DMI (red line) shows near term momentum with the bears.
To get out of the mess that they now find themselves in, the bulls are going to have to clear that downtrending 50 day moving average again. That is way up there near $1240 at the moment.
Proof is in the price chart for the metals but I can say the same thing about these grains. Most of us who trade the grains for a living all had ideas where we thought the grains were heading. Most of us were also wrong!