With both $GOLD (spot gold prices) and GLD (Gold ETF) making very solid & impulsive breakouts above their primary downtrend lines on Thursday and prices still holding towards the high-end of Thursday’s breakout, the next long-term buy signal in gold has been all but confirmed. My longer-term swing target for $GOLD remains the 1525-1550 area although I don’t expect it to be a straight shot up. Both GLD & GDX have recently moved into overbought territory on the RSI on the daily time frames. As these daily charts of $GOLD & GDX show, all overbought readings in recent years were followed by substantial corrections in both gold & the gold mining stocks, although some of those corrections began weeks after the initial overbought reading. I will say, however, that my expectation this time around would be to see prices continue to move substantial higher, with only a relatively minor correction, at least for a few weeks, possibly months.

Of course that may or may not be the case but I figured that I would be remiss to not point out the pattern of previous corrections that followed such overbought conditions and I also wanted to share the fact that I am less concerned about the overbought conditions this time around based on the longer-term bullish technical posture of gold & the gold stocks. However, just because I don’t expect a very meaningful pullback does not mean that I think this is a very objective time to be initiating new exposure to the sector either. Not only are gold & the gold stocks overbought on the daily time frame but they are also very overbought on the short-term time frame & approaching resistance to boot (the previous T2 zone in which GDX hit & consolidated in from mid-Feb to mid-March). Just beyond that resistance zone, now labeled R1 zone, lies the reaction high from March 14th, then my 3rd & final target from the original long-term trade entry on GDX.

 

Zooming out to the weekly time frame on both Gold & GDX, nothing has changed for weeks now. Three weeks today, on June 2nd, I stated that: “$GOLD (spot gold price) has now pulled back to the primary uptrend line that I highlighted in the Dec 31st Time to Start Buying Gold post. As with back then, gold (and my preferred trading proxy, the mining stocks) once again offers an objective long entry here with my preference again being a scale-in approach to the stocks with the best R/R profiles.” Both spot gold & GLD bottomed the very next day & have gained about 6% since then. Bullish chart patterns on the 15 minute charts of GDX (Gold Miners ETF) & SIL (Silver Miners ETF) were posted the following day and broke out shortly afterward with GDX gaining about 17% & SIL about 23% so far and substantial larger gains already booked on the three individual mining trades posted at the time (SSRI, GPL & AUQ). I had planned to add some other individual mining stock trade ideas but as the move over the last few weeks happened so quickly, I decided to just focus on the handful of trades posted in early June and would prefer to see a pullback or consolidation in the miners before adding back exposure to the sector. The 60 minute chart of GDX below lists a couple of objective levels to add or initiate exposure to the mining sector, should a pullback begin soon. If prices happen to move substantially higher before a meaningful pullback, these pullback targets may be revised.

The bottom line is that even though overbought conditions may continue to persist for days or even weeks in the miners before a substantial pullback, my preference is to wait for the next objective opportunity to add back the exposure to the mining sector that I’ve reduced over the last week as most of the recent mining sector trades have reached their final targets. Keep in mind that I am referring to the trades based off the intraday (15 & 60 minute) charts such as AUQ, GPL, SIL, GDX & SSRI (currently trading in between T2 & T3, the final target). Longer-term traders & investors in GLD, SLV, GDX, SIL, or any individual miners should not be overly concerned with timing near-term pullbacks & breakouts other than using those levels to strategically add to (scale in) longer-term positions.