Something Has Changed in Gold

FX:XAUUSD   Gold / U.S. Dollar
134 0 3
While good things are happening under the surface for Gold             , its lack of a strong rebound in recent months argues that such a rebound is in the future but not imminent. Gold’s steady downtrend could resume in the next week or two.

As we know, the precious metals complex enjoyed another very strong week. Gains in the metals were somewhat muted in comparison to the gains in the miners. GDX             and GDXJ             surged nearly 16% and 11% respectively. Last week we said nothing has changed. This week figures to be the week something did change and definitely so for the miners.

The strong gains in the miners since their January 19 low (31% in GDX             and 23% in GDXJ             ) typify what could be the start of a new bull market. The current rebound can be compared to the rebounds from the major bottoms in late 2000 and late 2008. We use the HUI             gold             bugs index for comparison as the ETFs do not go back far enough. The HUI             has gained roughly 40% since the January 19 low. That fits well with the analog chart below which puts the three rebounds on the same scale. If the gold             stocks are in a new bull market then they should continue to make new highs over the next few months. Turning to Gold             , I see less evidence that Gold             has established a major bottom. To be blunt, Gold             needs a monthly close above $1180/oz, which has been a major pivot point since late 2009. First things first, Gold             needs to close this month above $1150-$1160/oz. The bear scenario would have Gold             making a bearish reversal sometime this month and closing below initial resistance at $1140/oz. The bull scenario would likely have Gold             closing above $1160 and testing $1180 fairly soon.
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