If looking at Gold only in a vacuum, it looks good. Its uptrend since the start of the year remains intact and it has pushed above its 50 and 200-day moving averages. It closed the week at $1280/oz and could test $1300 next week. But looks can be deceiving. Considering the US Dollar index closed at a 7-month low today, Gold is lagging a bit. Moreover, both Silver and the gold miners have not confirmed Gold’s recent rise. In fact, the miners are lagging the metals ‘bigly.’ At the moment the miners are not so oversold but a reversal in Gold could be the catalyst that pushes miners to oversold extremes.
Both gold and silver miners are sporting another bearish divergence. The early April divergence (new highs in metals but not in the stocks) preceded a selloff into May and now we must be on guard for the May divergence causing a selloff in June. Since the middle of May both Gold and Silver have climbed higher while the shares (GDX, SIL) have not. The shares are again lagging the metals while Silver is again lagging Gold. These divergences are an obvious warning sign.
This post was published at GoldSeek on 4 June 2017.
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