Metals & Miners Still Searching for a Bottom

11/21/2013 9:00 am EST

Focus: COMMODITIES

As precious metals and miners continue their search for a bottom, Chris Vermeulen of TheGoldandOilGuy.com is watching very closely for signs of a real bottom before making his move.

A couple weeks ago I posted these same charts talking about the pending breakout (in either direction) with silver, gold, and mining stocks. Fast forwarding to this week it's clear this sector continues its struggle to rally. Key support levels are now being tested, and if these levels fail, prepare for a sharp correction with mining stocks showing the most downside potential of roughly 25% for the GDX ETF.

Let's take a quick look at what is going on.

Gold Trading Chart
The chart of gold shows price being wedged into the apex of the down sloping resistance trendline and the rising support trendline. Gold was trading below this level but has since bounced. But if gold closes the week below this line in the sand, the price could start to fall quickly and test the $1,200 per ounce within a week or two.

chart
Click to Enlarge

Silver Trading Chart
Silver is under performing gold and trading below its support level currently. If silver does not recover by Friday's closing bell, then things could get ugly for a few weeks as investors start to exit their positions. That being said, I need to point out that silver is more of a wild card when using trendlines like this. Both gold and gold miners should be confirming this breakdown in silver, if it is the real deal.

chart
Click to Enlarge

Gold Mining Stocks ETF
The chart of gold miners is one I like the most. I like it because it's pointing to lower prices, roughly 25% lower if the breakdown takes place. Gold mining stocks could be a fantastic long-term investment if we see the $17.50 level reached on this GDX ETF.

chart
Click to Enlarge

Last week I talked about ETF trading strategies and the big picture on gold, silver, miners, and bonds. They look to be nearing a major bottom, and once they do bottom, it should be a great buying opportunity for specific stocks or the entire sector.

The next few weeks are going to be crucial for precious metals and we will keep an eye on them as this bottom unfolds.

By Chris Vermeulen of TheGoldandOilGuy.com

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