In our last Gold Stock Indicator, published October 28, 2018, we offered up $1,755.41 as the extreme upside resistance level for gold. When the same level is drawn to the most recent price, we find that gold has struggled at the $1,755.41 resistance line.
It is one thing to struggle but it is an entirely different situation to collapse below the last remaining upside resistance level. Ordinarily, the price action above the descending $1,755.41 line would have assured us of a rise to the previous peak. Now, with the latest collapse, the price of gold is slated to bounce at the descending $1,615.82 level. That descending line is the equivalent of the $1,343.75 price.
Looking at the Philadelphia Gold and Silver Mining Stock Index (XAU) leads us believe that the $1,343.75 level in gold, although a very extreme level on the downside, could be a realistic target.
Notice that the XAU index could not exceed the upside resistance target of 166.09 AND the prior peak set in August 2016. That is a significant hurdle that should have been breached on the upside. Instead, the failure puts emphasis on the downside target.
The XAU index stands to re-test the 133.80 level which is the equivalent of 52.00. It should be noted that the XAU is the leading indicator for the direction that the price of gold should go. If you didn’t notice the rise in gold stocks from the late-2015 low then you shouldn’t notice it now.
The latest upside action of double digit percentage increases is a warning of more downside risk rather than a resurgence to the 2010 peak at 228.76 (our April 2011 call that the XAU would decline -66% [it lost -83%] found here).