Gold Stocks Slump This Week; Time To Move On Or Is It A Buying Opportunity?
Gold stocks and the price of gold have gotten beaten up this week. Amid strong optimism that could indicate a nation-wide reopening in the U.S., safe-havens have sold off. But right now, more than other times, it’s important to keep track of a few things.
For starters, the price of gold has more or less dictated the pace of gold stocks for the last few weeks. This is both good and bad for obvious reasons. What’s more is that certain gold stocks have been more heavily influenced by gold price movements than others. For instance, Barrick Gold (GOLD Stock Report) continued to tank on Wednesday. Shares slid back to the 50-day moving average for the first time since April.
For months the 50-DMA has acted as support for Barrick gold stock. With the exception of the entire market sell-off in March, this has held true. Furthermore, the 50MA has represented a strong and consistent “bottom level” for GOLD stock.
Can Barrick Gold Stock Rebound?
Will that continue remaining the case? That’s a great question. Right now it’s coming close to a “make or break” in my opinion. If Barrick gold stock price dips into the land of the unknown, the retrace may see a dip to levels in February and most of March.
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Why say this? Basing it on the GOLD stock chart alone, we can see that Barrick Gold managed to settle out around $18.50-$19 whenever it would consolidate this year. While Barrick is still relatively far off from that range right now, it’s something to take into consideration from a technical perspective.
Newmont Gold Stock Bounces Off 50DMA
Shares of Newmont (NEM Stock Report) mirrored Barrick gold stock price on Tuesday. They also dropped to, tested, then bounced off of the 50-day moving average. After hitting lows of $55.75, NEM stock jumped back above $57 during the afternoon session. Trading volume also became a factor to take notice of. It was the second consecutive day in a row that the market saw more than 10 million shares trade.
While this latest volume is above average, it’s not nearly as much as NEM stock saw around the time of the March drop. At that time, you can clearly see shares breaking below all major moving averages. As far as intermediate technical levels are concerned, Newmont gold stock had a tough time breaking and holding above $52 in March. This could be the first technical level of potential support to look at if NEM ends up breaking below the 50DMA.
Will that happen? That’s a great question but keep in mind that new economic data has come out that might not paint the rosiest of pictures for the short term economic recovery. So we’ll see what the next few weeks hold as far as things like unemployment data and payrolls.
What About Gold Mining ETFs?
We can’t just look at gold stocks alone. If you look at some of the major gold ETFs you should notice something interesting. While NEM and GOLD stock prices slid to major averages like the 50DMA, others clearly haven’t suffered such large blows. Taking a look at the VanEck Gold Miners ETF (GDX Report), you’ll see that it still trades above its 50Day.
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True, Barrick gold stock, and Newmont are two of the top holdings in the $14B net asset ETF, but other gold stocks comprise the other 71% of the ETF’s holdings. This includes Franco-Nevada (FNV Stock Report) and Wheaton Precious Metals (WPM Stock Report), for example. Both gold stocks pulled back this week. However, they both maintain a relatively higher level of support, overall, on comparison to NEM and GOLD.
If you look at the GDX chart, however, you likely notice that the price has pulled back to a recent pivot point. Between $30 and $33, GDX saw both points of resistance and support since February. As it approaches this level yet again, it’s likely going to be up to the holdings in the ETF to maintain their own technical levels. Could a further pullback in shares of Barrick Gold and Newmont trigger a breakdown of others?
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