Gold and Mining Stocks' Death Cross
Gold has just experienced a Death Cross, where its declining 50 Day Moving Average has crossed below its declining 200 Day Moving Average.
What this means is the 50 day moving average should provide powerful resistance for Gold, and that new declines should start whenever any rallies in Gold kiss this 50 day moving average (or come close). This resistance from the 50 day should continue until the 50 day Moving Average crosses back above its 200 day Moving Average.
Below we show how Gold behaved after its last Death Cross, back in March 2013. What we see is Gold initially fell for a few weeks, then rallied back up to that declining 50 Day Moving Average, but could not bust out above that 50 DMA, and once it approximately reached that line, Gold then resumed its descent. This is very likely what is happening to Gold right now. Gold initially fell, and the last week has been rallying back toward the declining 50 DMA. If history repeats, Gold should come close to its 50 DMA over the next week, then resume its descent.
The HUI generated a Death Cross back in May 2014, just the second one since early 2013. When it generated a Death Cross in early 2013, Mining Stocks fell for several months and sharply.
Our read on Gold is that it is finishing its correction since September 2011 of an ongoing long-term Bullish trend. The corrective decline from 2011 looks to need one more decline toward 1,200, and we believe that once that level is reached, the odds rise that the correction in Gold from September 2011 will be finished and Gold will begin a long march to new all-time highs.
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