Technical analyst Clive Maund discusses how precious metals prices would be impacted by the Fed’s interest rate decision this week.
The Precious Metals (PM) sector correction may be completing RIGHT NOW, with sector indices at the 2nd low of a potential Double Bottom. Whether it is or not depends on the outcome of the Federal Reserve meeting—if it announces a rate hike, then both the broad market and the PM sector can be expected to break sharply lower. If it doesn’t—if it puts it off again till later, or never, then the PM sector should take off higher again. We cannot know in advance whether the Fed will hike or not, but we can be sure that its intentions have already been telegraphed to the 1%, so that they can position themselves to profit in advance.
Going solely on the year-to-date chart for the GDX (VanEck Vectors Gold Miners ETF), it does look like it is completing a Double Bottom at the support level shown, and setting up for another big rally, although it could break either way. The chances of it breaking to the upside are now rated at 65%—against 35% for a breakdown—and it does make sense for the Fed not to hike, as its prime duty is to keep asset prices elevated for the benefit of the 1%, not look after the economy—it abandoned that responsibility many years ago.
This would in fact be a classic place for a major new uptrend to begin. The sector has endured its deepest correction since this new bull market phase began; that has seen many quality stocks correct back heavily. The sector has gone from being heavily overbought at the start of July to substantially oversold, and is in a zone of strong support above a rising 200-day moving average, which …read more