GDX is trading above its 50 day moving average for the first time since October 2012. That’s quite a 9 month streak of weakness, paralleled by the steep downtrend in gold and silver in that period as well. The 1 year chart:
The break higher in GDX has been led by its largest component, GG, which is actually trading right at its 100 day moving average, well above its 50 day ma. I laid out my fundamental thoughts in a Name that Trade on the companies trading in the gold mining sector 3 weeks ago. GG continues to be my favorite for those who are bullish on precious metals overall (I’m more neutral here with GLD approaching resistance).
GLD and SLV have bounced in July as well, but both metals are still trading below their 50 day moving averages, unlike the miners. GLD is at an important inflection point, near the $130 level that served as support on a couple instances this spring:
Given the volume that has traded near 130 so far this year (and hence the many underwater owners of gold), breaking right through that level on the first try seems like a difficult proposition. The 50 day moving average is also at 129, and it hasn’t closed above the 50 day ma since 2012.
The outperformance of GDX relative to gold and silver is the first hint of optimism for a sector that has been so beaten down in the past 9 months. Whether it’s just another dead cat bounce or not for precious metals, investors are preferring the stocks to the actual commodities for the first time in years.