Rupesh
Long

Precious Metals Sector Due for Bounce but…

FX:XAUUSD   Gold/U.S. Dollar
45 0 3
The precious metals sector has declined sharply in recent weeks with no pause or intermittent breaks in the decline. Including today, Gold             is down eight consecutive days and 16 of the past 18 days. The gold             miners ( GDX             ) have lost roughly 20% in the past seven days. The sector is extremely oversold in the short term and a reflex rally could begin in the next few days. While Gold             and gold             bugs should get temporary relief, the larger picture remains quite bearish .

The daily candle charts of Gold             and GDX             are included in the image below. (Note that Gold             is not updated today). Gold             which has traded as low as $1084/oz today, has support in the $1080/oz to $1100/oz zone. Meanwhile, GDX             after gapping lower today found support around $13.50. GDX             has good support in the $13.00 to $13.50 area. Gold             and gold             stocks are very oversold and have reached levels at which a bounce could begin.

While Gold             and gold             shares are likely to rally in the days ahead, the overall prognosis remains decidedly bearish . Consider the monthly candle chart for Gold             . Monthly charts carry more weight than weekly charts and much more weight than daily charts . Gold             appears to be breaking down from the bearish flag pattern formed in recent months. After plunging in July, Gold             rallied in weak fashion and failed one last time at major resistance of $1180/oz. The flag projects to a downside target of roughly $1035/oz. Ultimately, the bear market could end at one of the two targets shown in the chart, $970/oz or $890/oz.


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