We are currently experiencing the sharpest divergence between gold miners and gold since February/March 2017:
GDX/GLD Daily (2/8/2018)
The GDX/GLD ratio is actually slightly more oversold than it was at the low in March 2017, however, this plunge (~12% in the GDX) is still significantly smaller than the plunge (~18%) we saw in gold mining shares from the peak in February 2017.
Moving to the gold chart it's not hard to see the importance of the $1300 level:
Gold (Daily)
The ~$55/oz drop from the January high has served to rattle gold sentiment to the point that it is now firmly back in neutral territory. From a structural standpoint if today's low ($1309) holds up over the next couple of days the recent decline will look like a healthy pullback within the context of an uptrend.
While the range of potential outcomes over the next few weeks is highly variable (more than usual) my bias is to be a buyer of gold miners (GDX etc.) as early as tomorrow; sentiment has moved back into depressed territory on gold miners very quickly and the GDX is close to major long term support after falling for 8 of the last 9 trading sessions. I'm also inclined to believe that gold will surprise to the upside over the next couple of months with a long awaited breakout above $1400. It would take a decisive move below $1300 for me to change this assessment.
Be careful out there and it is a good time to remind ourselves that we really don't know anything in markets (even though sometimes we get fooled into thinking that we do), and market character/correlations can shift very quickly. With the recent uptick in volatility I have cut my position sizes in half and I find myself increasingly patient in picking and choosing my entry points.
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