Gold Mining Stocks Still Negative

A quick look at the weekly gold chart shows that the metal is holding above a line of support that goes back over a year.

 

In contrast, the XAU Index (gold mining stocks) has formed a bearish head and shoulders pattern, which executed when price dropped below the neckline earlier this year. We can see that the breakdown was followed by a brief snapback before the decline continued. At this point the minimum downside target would be the support line drawn from the October 2008 low.

 

It would be useful to note how dissimilar the two price lines are. One would think that the stocks would be closely related to the metal, but the charts will quickly clear up that misconception. (Prices are intraday.)

Conclusion: While for the time being gold has bounced off long-term support, the XAU has signaled that there are still lower prices ahead for gold mining stocks.

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Technical analysis is a windsock, not a crystal ball.

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BIO: Carl Swenlin is a self-taught technical analyst, who has been involved in market analysis since 1981. A pioneer in the creation of online technical resources, he is president and founder of DecisionPoint.com, a premier technical analysis website specializing in stock market indicators, charting, and focused research reports. Mr. Swenlin is a Member of the Market Technicians Association.