Miners Leading Gold Lower into the US ElectionFriday November 04, 2016 10:28
As we head into one of the most controversial elections in US history, the miners appear to be leading the gold sector lower. The low struck from this move could very well be the final low for this correction of the huge first leg higher of this new miner bull market. I believe the sector formed a major six month bottom from July 2015 to January of this year after capitulation selling began toward the end of 2014.
I am still leaning toward the GDX 20-21 level to be tested and held very soon. This area could quite possibly be hit by next Friday’s Non-Farms Payroll report (NFP) as we head into super Tuesday, November 8th. The oversold bounce, which began two weeks ago from the GDX 22.50 level, has been unable to trade into the October 4th “stop run” gap before heading lower this week. Gold was also stopped cold at the $1275 area before heading back down with miners now leading the sector lower. This is a bearish sign, which now sets up a possible final sell off into the GDX very strong support area of 20-21.
In Thursday’s gold sector market action, we had the miners sell off hard with gold and silver slightly higher on First Notice of Delivery day in the futures market. The miners usually lead the metals, so this could very well portend the beginning of a final sell off in the sector. I mentioned this possibility in a previous post, which I have been waiting for in order to be comfortable with concluding the miners having reached a probable bottom before beginning the next leg higher of this new bull market.
A very useful statistic in gauging where we are in terms of reaching a bottom in the sector is the gold market sentiment indicator. We are getting very near the levels of previous bottoms in gold as they are currently at only 21% bulls. One more sell off should clean out the last of the late comers to the sector and set up a very low risk entry point for those waiting on the sidelines here.
Keep an eye on the $1250 gold level into the election as I believe this area must be held on a weekly closing basis in order to negate the 22 level being breached on the GDX. I am also still waiting for the GDX 26 level to be reached on a weekly closing basis in order to be convinced of a miner bottom and the beginning of the next leg higher of this new miner bull market. Whether the sector hits the aforementioned 20-21 level before resuming this new bull market most likely depends on strong weekly support of gold $1250 holding. The weak miner action here is telling me $1250 gold is in danger of being breached, which would probably trigger a final sell off in the miners as we head into the election on November 8th.
David Erfle is a 52 year old self-taught mining sector investor. He stumbled upon the mining sector in 2003 as he was looking to invest into a growing sector of the market. After researching the gains made from the 2001 bottom in the tiny gold and silver sector he became fascinated with this niche market. So much so that in 2005 he decided to sell his home and invest the entire proceeds from the sale into junior mining companies. When his account had tripled by September, 2007, he decided to quit his job as the Telecommunications Equipment Buyer at UCLA and make investing in this sector his full time job. He personally survived two bear markets, witnessed incredible sector changes and had to alter his investment philosophy numerous times in order to adapt to changing market conditions."