Gold and Precious Metal Shares Still Point to Lower Prices.

As I stated here, it is my believe that the technical setup in both gold and the gold stock indexes point to lower prices. This opinion is based on a number of indicators, the first of which is that the price of the gold/precious metal stock index (here the Market Vectors Gold Stock Index Ticker GDX, but the same setup is seen in the Junior Gold Miner Index- GDXJ and the Phily Gold/Silver Index XAU) is weaker than gold. I have shown in previous research that commodity gold performance tends to follow the performance of gold stocks. I think the weak performance in gold shares is an indicator that gold prices will be lower in due time.

Additionally, my outlook is based on the technical setup seen in the above and below charts. First and most importantly, the rally attempt we seen in both gold and gold stocks since the beginning of November has been on weak volume characteristics. To me this suggests a lack of trader conviction or operators trying to jam prices higher to work positions. Other indicators, including the MACD, accumulation/distribution, and money flow remain weak, also suggesting the rally has little underlying strength.

The last point I would make is highlighting in post over at Zerohedge posted earlier today....

Just like yesterday, as we head into the European close it seems someone somewhere has the dire need to reduce exposure to precious metals in a hurry... Collateral calls? Cash calls across month-end? Who knows?



Chart: Bloomberg

Someone is selling gold and precious metals. Is this endemic or a one off situation? I have no idea, but it must be someone with large enough positions to jam the prices lower.