The recent sharp decline in the stock market pulled gold stocks lower. GDX (NYSE:) declined 14%, and GDXJ (NYSE:) declined 18% in only three weeks. However, they have started to recover as gold is now trying to pull away from its correction, which turned into a bullish consolidation.
GDX closed Thursday at $37.29, just below weekly resistance at $38 and $40. It has not made a weekly close above $41 since the end of 2012! Technically, GDX formed an irregular but potentially bullish cup and handle. The measured upside target would be a minimum of $44, the 2020 high.
GDXJ closed Thursday at $45.11. It has closed above $47.50 for only one week since early 2021. Its potential cup and handle pattern projects above $55. Before the sharp correction, the miners and juniors had made good progress against Gold.
They have been outperforming Gold since Gold began its breakout move in February. Historically, they reliably outperform after breakouts in Gold. The GDX to Gold ratio again bounced at its 200-day moving average while the GDXJ to Gold ratio rebounded.
Gold has little technical resistance between $2500 and $2900-$3000. Because cost pressures are down, miners and juniors will reap the rewards of the next leg in Gold. Keep an eye out for GDX $40 and GDXJ $47.50. Weekly closes above would trigger additional upside and increase attention on our sector.
There is still plenty of value and upside potential in high-quality juniors. Now is the time to act because it might be too late in the fall.
Analysis:
The recent decline in the stock market has impacted gold stocks, but they have shown signs of recovery as gold tries to move away from its correction. GDX and GDXJ have specific price points to watch for potential bullish movements. Historically, miners and juniors tend to outperform after breakouts in Gold, indicating potential upside in the sector. With gold facing little resistance and cost pressures down, there is optimism for further gains in the market. Investors should keep an eye on key price levels for GDX and GDXJ as they could signal additional upside potential.