Aside from silver’s loss of support, gold is breaking down from what appears to have been a bear flag pattern defined as the lame rise from mid-May.
One would not think a lukewarm jobs report could do such damage. But one might think that the sentiment bump we noted (ref. Sentimentrader graphic from NFTRH 241) on the gold bug sector could. And it apparently has. Gold is and has been in a down trend off of the big breakdown in April and the break from this flag will seek to continue that trend. That is the short-term technical picture.
HUI is threatening to lose the EMA’s 10 and 20 today but 260 is the point that fills the gap and confirms or breaks the short-term up trend.
In a best case scenario, this could be the hit that teaches the gold bugs that they are wrong, are always wrong and will stay wrong. In other words, in a best case scenario this would be the final shakeout that causes so much doubt we will not see sentiment spikes like last week again anytime soon. Bottom callers may finally be reviled. That would be a sentiment bottom.
I have not mentioned it much in the recent past because things have been so relentlessly bearish but it is best to be very careful when the gold “community” is frisky, giddy or chest thumping. In the best case, this hit is fixing the little pop in gold community sentiment.
But gold’s technicals are short-term bearish and the miners, less so. We should watch for the bullish divergence to remain intact or get eliminated. Right now, the HUI-gold ratio looks pretty darned good in holding the moving averages.