The precious metals and junior mining sectors have been in a corrective phase since early August and we are just beginning to see signs that this correction could be coming to an end.
The GDXJ Daily Chart shows a descending triangle that is on the verge of resolving higher:
Remember that the GDXJ chart once displayed a very real possibility of confirming a bearish H&S top.
GDXJ Daily Chart From 8/25/2020
However, chart patterns tend to morph and that is exactly what has transpired in GDXJ. We should also always give the benefit of the doubt to the longer term controlling trend, until proven otherwise.
With the ECB confirming that they are comfortable with a stronger euro this morning, the US $ price of gold has shot back above the $1960 level and GDXJ could be well on its way to finishing this week above the key $60.00 level - a weekly close above $60 in GDXJ would deliver a bullish engulfing candlestick on the weekly chart and confirm a decisive breakout from the descending triangle on the daily chart.
This is all very bullish stuff.
Turning to gold itself we still need to see a weekly close above $2,000 to snap the recent series of lower highs,, and increase the probability that the next leg higher has begun:
I have remained consistent that the previous all-time high near $1920 has now become important support - so far gold has held firm and bulls have defended this support level on multiple tests in recent weeks. Now we will have to see if bulls have what it takes to drive gold back above a layer of resistance between $2,000 and $2,025.
With a Fed committed to creating inflation and the 10-year UST real yield already at -1.00%, and increasing US/China tensions which have prompted China to announce that it will reduce its US Treasury holdings to US$800 billion from more than US$1 trillion, you have a highly favorable backdrop for gold and silver to make fresh highs over the next few months.
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