By Jordan Roy-Byrne
The Daily Gold
We’ve been very bullish on the miners since January but became concerned recently with the poor technical action in the metals (specifically Gold). Last month the mining indices were very close to a major breakout yet couldn’t punch through. This signaled that Gold could begin a deeper decline and the miners would be vulnerable.
However, Gold failed to break below $1,280 while the miners have continued to digest their early summer gains and hold support. In addition, Gold is showing increasing relative strength amid US$ strength and equity market weakness. If Gold continues to show this kind of relative strength in the weeks ahead then it raises the odds that the miners will break to the upside in September.
Usually I prefer to focus on the miners as they lead the metals at key turning points. However, I want to present a few charts that focus on Gold. Below we plot Gold and Gold against foreign currencies (using the UDN ETF). We see that Gold is gaining strength against foreign currencies. It’s inches away from a five month high. Moreover, during recent weakness that chart never threatened its 200-day moving average which is starting to slope upward. Gold in US$ is not quite as strong but appears to be following the other chart which made its low in mid July.