As we work through the aftermath of a contentious election season, it’s become clear that gold and other precious metals did not come out as big winners. While the long-term trend remains strong based on traditional trend-following metrics, the short-term charts have become quite oversold. Does this mean we are setting up for a quick mean reversion trade for gold stocks? First, let’s recognize the strength of the uptrend in gold leading into November 2024. At the end of October, the SPDR Gold Shares (GLD) was up 32% for the year, compared to S & P 500’s +21% and the Nasdaq 100’s +19%. Gold wasn’t just performing well, it was absolutely dominating other asset classes. One of the reasons helping to propel precious metals higher was a weaker US Dollar, and unfortunately, that trend reversed going into the month of October. Here we’re showing the US Dollar in the top panel and the gold futures in the bottom panel: As we can see from the general trend in the two series, there tends to be an inverse relationship between the USD and gold. Which means when they start moving together, one of those trends is most likely going to change. While the two trends were both higher in October, a post-election surge in the US Dollar appeared to signal the end of the golden era of gold in 2024. And while the long-term chart of gold remains in decent shape, the short-term reversal in recent weeks has pushed gold stocks down to key price support. Reviewing the chart of the VanEck Vectors Gold Miners ETF (GDX) , we can see that gold miners actually had already begun to sell off starting in mid-September: And instead of finding support yet again at an ascending 50-day moving average, the GDX broke down through this common support level in early November. Now the GDX is testing its 200-day moving average, which also represents a 50% retracement of the 2024 bull phase. Given the fact that the RSI was oversold this week for the first time since October 2023, this could be a reasonable point at which to expect a countertrend rally to the upside. If the current support level would not hold, we’d be looking for further support at the 61.8% retracement level around $33, which lines up well with the June 2024 swing low. In terms of a longer-term inflection point for gold, it’s all about finding signs of accumulation. Look back to February 2024 for a great example of a downtrend phase with the RSI consistently below 50 and the PPO indicator well below the zero level. Then in March 2024, we saw the RSI push well above 50 on a quick rally for the GLD, and the PPO flashed a bullish signal to confirm a new uptrend phase. Given the weakness so far in November 2024, we’d consider the current setup as more of a potential trade than an investment. But once we see a bullish inflection point, similar to what we observed in March 2024, then gold bugs may once again have plenty of reasons to celebrate. -David Keller, CMT marketmisbehavior.com DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
