In the last Market Update it was emphasized that we were at a critical point, where either gold breaks down and drags gold stocks with it, or the word stock indices rally from after testing their support level, taking gold and gold stocks with them.

Since the latter was the case, we can expect further long-term strength in the gold stocks. Nonetheless it seems that the previous resistance level needs to be verified as a support, thus confirming the breakout.

The reason we are sending this Speculative Alert is that it is very probable that the abovementioned process is just starting. Please take a look at the USD and GDX (proxy for gold stocks) charts below:

USD

GDX

Rapid upswings usually need at least a brief breather before a particular stock/index can rise again, and the probable (at least) small bounce in the USD would ideally correspond to the pullback in the gold stocks. At the moment of writing this Alert, the USD Index has just touched the 61.8% retracement level and bounced.

In our view, we are approaching a very good entry point to add to your long-term holdings and perhaps to speculate on rising gold stock prices after the support level holds. More details can be found directly on the abovementioned charts.

Sincerely,
Przemyslaw Radomski, CFA