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Gold breakout not confirmed yet

Commentaries & Views

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.

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.

We continue to focus on identifying and accumulating those stocks with significant upside potential over the next 12 to 24 months. To learn the stocks we own and intend to buy that have 3x to 5x potential, consider learning more about our premium service.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.