Gold is back in rally mode.
Two weeks ago, the shiny yellow metal was trading for $1,830 per ounce. It closed at that exact same level on Thursday.
So, why is it all of a sudden in rally mode?
Because the gold stocks are outperforming the metal.
It was also two weeks ago when we looked at the GDX/GOLD ratio chart – which compares the action in gold stocks to the action in gold. We noted that gold tends to do best when the gold stocks outperform the metal.
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Two weeks ago, the ratio chart was falling… and gold stocks were underperforming the metal. But that changed on Thursday.
Take a look at this updated chart…
This chart has broken above the dashed-red downtrend line – where it was making a series of lower lows and lower highs – which indicates a downtrend. It now has a higher low and a higher high in place – which should signal the start of a new uptrend.
The last time this chart signaled a gold rally was back in March. The price of gold rallied nearly $200 an ounce over the next two months. Something similar this time around would pop the price of gold above $2,000.
Of course, it won’t be a straight shot higher. Gold will have plenty of pullbacks along the way.
But, as long as the gold stocks are outperforming gold – meaning as long as this ratio chart is making higher highs and higher lows – then gold is in rally mode. And, it’ll be higher in the weeks and months ahead.
Traders should use any weakness in the price of the metal as a chance to buy. We’ve started another multi-week rally phase for the price of gold.
Best regards and good trading,
Jeff Clark
Reader Mailbag
Are you bullish on gold? If so, will you be using this recent weakness in price to buy more gold?
Let us know your thoughts – and any questions you have – at [email protected].