Let’s face it… 2017 has been tough for gold stock investors.
While just about every other asset class has enjoyed strong rallies, gold stocks are barely breaking even. The NYSE Arca Gold BUGS Index (HUI), for example, closed yesterday exactly where it was on January 3, 2017.
Meanwhile, the S&P 500 is up 16%. Treasury Bonds are up 9%. High-yield bonds have rallied 10%. Emerging markets have racked up gains of more than 20%. International developed stock markets all have double-digit gains. Even oil – which spent the first six months of the year in a steep downtrend – is now trading 4% higher than where it started 2017.
You could have made money this year in just about anything besides gold stocks.
Of course, that’s not to say gold stocks didn’t have their moments to shine. The gold sector actually put on several decent intermediate-term rallies this year.
The VanEck Vectors Gold Miners Fund (GDX) has enjoyed four separate multi-week rallies – racking up gains of 16%, 15%, 12% and 19%. But you had to be quick to take profits, because the gold sector gave up the gains just as quick as it earned them.
Just look at this chart of GDX…
The first three rallies in GDX this year gave back 100% of their gains. And a new rally got started only after the MACD indicator dropped into oversold territory and the short-term moving average crossed over the longer-term moving average line (noted with the blue circles on the chart). Those “bullish crosses” coincided with the end of the gold stock decline phases and the start of the rally phases.
The rally that peaked in early September was the strongest of the year so far for gold stocks. The decline from the peak, however, did NOT give back 100% of the gains. Instead, the chart has formed a higher low. That is bullish action.
Notice also that the MACD indicator just completed a bullish cross. And GDX appears to have broken above its downtrending resistance line.
This could be the start of a new rally phase for the gold sector.
With that in mind, traders should use any short-term weakness to add more gold stock exposure.
Best regards and good trading,
Jeff Clark
P.S. I just showed my Delta Report subscribers my favorite trade in the gold sector right now. It has the potential to earn 167% over the next three weeks.
To find out more about it, click here…
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