Gold miner with nugget

This Sliding Index is About to Send GDXJ and Other Gold Mining ETFs Down

Before moving to the chart, a few words why this index is a proxy for juniors, and why it’s not as perfect. It can be used as a proxy for juniors because literally hundreds of junior mining companies are listed on this exchange. It’s not a perfect proxy, because there are also other companies listed there that are not even close to the mining business such as tech stocks.

So… What’s going on in this proxy for junior miners?

It’s declining – that’s what’s happening. In particular, it declined below the rising medium-term support line that’s based on two profound and clear bottoms: the 2016 and 2018 lows. And it’s not something that happened just yesterday. It happened about 3 weeks ago and unless the TSX Venture Index rallies today, this week’s close will mark the third consecutive weekly close below this line. That’s important because this means that the breakdown – even though it’s tiny – was just confirmed. And confirmed breakdowns are likely to be followed by further declines.

Now, the more significant the support that was broken, the bigger decline one can expect, and the line that was just broken is definitely significant.

But maybe the tech stocks just underperformed?

Fat chance – the Nasdaq is very close to its all-time highs, so the odds are that it was not the technology sector that dragged the index lower.

Please note how closely did the TSX Venture Index follow precious metals sector (lower part of the chart includes gold, silver, and HUI – proxy for gold stocks) higher in 2016 and how the subsequent decline happened at the same time. The 2018 decline was also more or less in tune. The sizes of the moves were different, but overall, prices moved in the same direction on average in the medium term.

This means that the confirmed breakdown in the TSX Venture sends a huge warning to the gold, silver, and mining stock bulls. It’s not an immediate-term or even a short-term sign (we have plenty of them coming from other places), but it is a powerful sign pointing to sector-wide decline in the following months. We have been warned by yet another market. Those who refuse to listen will have to face the costly consequences.

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Gold & Silver Trading Alert – this analysis’ full version. There, we discuss gold outlook in more detail, recent platinum developments or the very short-term PMs situation. Finally, we’ve also included a helpful summary of the gold move’s determinants at play. Taken together, these paint a coherent picture of what’s likely to come in the following months. The full Alert includes detailed price targets for gold, silver, and the GDX ETF as well as related leveraged ETNs. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

Thank you.

Przemyslaw Radomski, CFA

Editor-in-chief, Gold & Silver Fund Manager

Sunshine Profits – Effective Investments through Diligence and Care

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