Possible rebound for gold miners ETF?

After heavy losses since July, the gold miners ETF appears to have bottomed out for the time being, although the longer-term downtrend is intact.

Gold bars
Source: Bloomberg

The closely-watched gold miners exchange traded fund (ETF), Market Vectors Gold Miners (GDX), has suffered since April, falling by a quarter from the peak that month to the September bottom, its decline outpacing the one seen in the actual price of gold.

This makes sense given that a weaker gold price has dramatic repercussions not just for revenues but also for margins and profits for gold mining firms. Despite a rebound since the lows of September, the outlook does not seem particularly encouraging for the ETF.

The weekly chart provides a clear view – the ETF has regained the $18.63 low from late 2016, and now moves on to challenge the $20.89 level that acted as support from the early days of 2017 (assuming, that is, that we see a weekly close above this level). Also then in the frame is the downtrend line from the August 2016 high, which came into play around the $23.00 level back in July. In the near term a rebound to this trendline resistance is possible, but it will require a weekly close above the March–July highs of around the $23.00 level to suggest that the downtrend has been broken.

A close back below $18.63 could be a bearish development, and suggests a possible retracement in the direction of the $12.37 low from late 2015 and early 2016, once the September 2018 low of $17.28 is broken.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.

Find articles by analysts