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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.

Chris Beauchamp ChrisB_IG
Chief Market Analyst, London

Publication date : 2018-09-20T12:07:17+0100

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.

GDX chart

GDX chart

GDX chart

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