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Gold rallied strongly yesterday on a safe haven bid amid stock market turmoil. As the stock market was sinking lower, moving closer to its August lows, gold and silver in USD moved more than 2% higher.
More interestingly, gold miners rallied more than 5% on the day.
The million dollar question is where we go from here. Let’s look at two charts to get an idea of gold’s and the miners’ outlook.
Chart-wise, the price of gold pierced a key resistance level at $1,150 USD/oz, which, until July of this year, was acting as a key support area.
Chart courtesy: StockCharts.
More importantly, the price of gold is sitting right on the trendline of triangle formation.
This is an important price level. If gold moves higher from here, we have a confirmed breakout.
A breakout is an outcome with a high probability, based on the COMEX gold positioning (as reported in the COT report, see below).
Chart courtesy: Sharelynx.
As we have said in the past, the net short positioning of commercial traders (blue bars in the center pane) is an important indicator. Every time that group of traders has held an extremely low net short position, gold tended to put in a multi-month bottom, followed by a multi-month rally.
The leverage that gold and silver miners in a breakout scenario will be huge.
The analyst team at Secular Investor has calculated valuations of quality gold miners, and they concluded that today’s situation is truly ridiculous.
Read more about Secular Investor’s gold and silver premium service, yesterday’s Alert about a junior gold miner with a calculated target price which is many multiples of today’s price, a Selection List of favorite gold and silver stocks.
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