Is gold starting another leg higher, or is this just a news-driven (Warren Buffet – Barrick Gold), potential Bull Trap before the next decline? The next 48-hours are crucial.
Gold and miners are rallying on news of Warren Buffet’s stake in Barrick Gold (GOLD). Is this story enough to extend the already stretched advance in precious metals, or is this simply a knee-jerk reaction that will quickly evaporate? Below are levels I’ll be watching in gold and GDX.
-GOLD DAILY CHART- After last Tuesday’s sharp decline, gold prices are rebounding. If prices close back-to-back above $2000 this week, then the Warren Buffet message may be enough to retest the $2089.20 high and perhaps break marginally above $2100. But if gold fails to close back-to-back above $2000, then we see the potential for another sharp decline towards our 6-month target.
-GDX DAILY CHART- We had a similar setup in GDX back in March just before prices collapsed. After the initial breakdown, GDX rallied 4 or 5-days before the second more powerful breakdown. We could get a similar result this time if prices fail to recapture $44.00. A strong close above $44.00 this week would give the Warren Buffet story some legs, and we could see an extension higher. Note- GDX needs to close forcibly above $44.00 to rule out a potential Bull Trap.
Have a great night.