Precious Metals Sector Alert Ahead Of The Fed…Possible Gold Price Double Bottom Forming

September 19, 2016
Technical Analyst & Author

The purpose of this update is to point out that the PM sector correction may be completing RIGHT NOW, with sector indices at the 2nd low of a potential Double Bottom. Whether it is or not depends on the outcome of next week’s Fed meeting – if they announce a rate hike, then both the broad market and the PM sector can be expected to break sharply lower. If they don’t – if they put it off again till later, or never, then the PM sector should take off higher again. We cannot know in advance whether they will hike or not, but we can be sure that their intentions have already been telegraphed to the 1%, so that they can position themselves to profit in advance.

Going solely on the year-to-date chart for the GDX, it does look like it is completing a Double Bottom at the support level shown, and setting up for another big rally, although it could break either way. The chances of it breaking to the upside are now rated at 65% - against 35% for a breakdown, and it does make sense for the Fed not to hike, as its prime duty is to keep asset prices elevated for the benefit of the 1%, not look after the economy – they abandoned that responsibility many years ago.

This would in fact be a classic place for a major new uptrend to begin; the sector has endured its deepest correction since this new bull market phase began, that has seen many quality stocks correct back heavily, and the sector has gone from being heavily overbought at the start of July to substantially oversold, and is in a zone of strong support above a rising 200-day moving average, which signifies that the larger trend is still definitely up. Yes, it could drop further if they hike interest rates next week, and it is this fear that is of course deterring would be buyers here.

How to handle this situation? Well, one approach is to jump on the best PM stocks the moment it is clear that there will be no rate hike, if this is the outcome, for the sector can be expected to finish the day with a big white candle before continuing higher. Another approach is to take a chance and buy ahead of the announcement, and perhaps take out insurance in the form of Puts, in case a rate hike is actually announced and the sector then drops.

Whatever happens, the PM sector is certainly better value than it was two months ago, and statistically the odds favor the major uptrend resuming soon.

We will be looking at a range of better PM stocks to consider buying early this coming week on the site (we already looked at a range of Australian stocks in recent days).

Courtesy of Courtesy of  http://www.clivemaund.com

Clive Maund

Clive P. Maund’s interest in markets started when, as an aimless youth searching for direction in his mid-20’s, he inherited some money. Unfortunately it was not enough to live a utopian lifestyle as a playboy or retire very young. Therefore on the advice of his brother, he bought a load of British Petroleum stock, which promptly went up 20% in the space of a few weeks. Clive sold them at the top…which really fired his imagination. The prospect of being able to buy securities and sell them later at a higher price, and make money for doing little or no work was most attractive – and so the quest began, especially as he had been further stoked up by watching from the sidelines with a mixture of fascination and envy as fortunes were made in the roaring gold and silver bull market of the late 70’s.

Clive furthered his education in Technical Analysis or charting by ordering various good books from the US and by applying what he learned at work on an everyday basis. He also obtained the UK Society of Technical Analysts’ Diploma.

The years following 2005 saw the boom phase of the Gold and Silver bull market, until they peaked in late 2011. While there is ongoing debate about whether that was the final high, it is not believed to be because of the continuing global debasement of fiat currency. The bear market since 2011 is viewed as being very similar to the 2-year reaction in the mid-70’s, which was preceded by a powerful advance and was followed by a gigantic parabolic price ramp. Moreover, Precious Metals should come back into their own when the various asset bubbles elsewhere burst, which looks set to happen anytime soon.

Visit Clive at his website: CliveMaund.com

Gold is one of the most recycled substances in the world.

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