alice

NFTRH; Gold Stocks, USD and the ‘Inflation Trade’

Here we play the short-term technical game again despite the gold sector running against its own fundamentals (i.e. as the ‘inflation trade’, including mining cost input oil, continues higher).  At some point this will matter.

But on the other side of the coin are price, momentum and technicals.  A Monday open can be a tricky thing, but as of this moment GDX is in a posture to break the most recent consolidation.

gdx

GDXJ as well.

gdxj

If gold stocks are going to run with silver stocks and crude oil (base metals are notably absent from this leg of the ‘inflation trade’) then they are going to run counter to USD.  The bounce target on USD was 94.50, but recently we have introduced the prospect of a further bounce based on the constructive look of the gold-silver ratio (see this public post highlighting the GSR this morning along with Keith Weiner’s views).  Here is USD real time.  It has halted around the bounce target but is still in a very short-term uptrend (or is that a bear flag?).

usd

 

Bottom Line

Fundamentals continue to fade but the technicals continue to be bullish for precious metals stocks.  There is no change to the view.  But I wanted to note the potential of a breakout on GDX and GDXJ, which if it is not a head fake, would send these items to the existing targets (equivalent to HUI 251 and the 2014 highs).

The caveat is that the US dollar has halted, but not turned down from the minimum bounce target.