Good Morning everyone, sorry for the missed update yesterday.
As predicted, Gold prices broke through the support region around $1281, the heavy selling momentum was caused by positive corporate earnings surprises as well as a positive outlook from the Fed. Both pieces of news point towards a healthy US economy, therefore easing investor fears and a fund flow from safe haven assets towards risky stocks.
Gold miners are following the momentum downwards, however $GDX prices is still supported by the region towards the bottom of the symmetrical triangle pattern. It seems that not all buyers have been exhausted just yet, but probability is still on seller’s side to win given the sell off in Gold.
Why I’m bearish on Gold and Gold Miners in the short to medium term:
All the following items provide a positive market sentiment, and a stronger willingness for investors to allocate money to risky assets such as stocks rather than safe haven assets like gold , and therefore selling of gold miners.
1.) Still strong US economy, based on the slew of positive economic data we’ve been seeing. Examples would be low jobless claims, good nominal wage growth and low inflationary pressures.
2.) Long end interest rates (10 yr) are rising due to reduced investor fears, causing a decrease in attractiveness of Gold , which is a non-yielding asset.
3.) US Dollar Index has been consolidating for the last several trading sessions, representing a bullish signal in the short term. Provided that we have a positive economic backdrop in the US currently, probability that it breaks out to the upside is high.
4.) Corporate earnings are likely to keep surprising to the upside, since projections have been lowered so much over the last few months.
5.) More likely for positive rather than negative news to come out regarding US-China trade deal. Both sides are committed and evidence suggests a positive outcome.