The precious metals sector could currently be trading within a bullish consolidation. The metals have consolidated and corrected for one month while the shares have been consolidating for three weeks.
Gold and Silver have bounced from support several times while the shares have traded around their highs over the past three weeks.
The sector (aside from Silver) is undoubtedly extended here, but there is a chance it pops higher once more before it experiences a sustained correction.
Gold has tested and held $1675 four times since April. It is trading within a bullish consolidation that has a potential measured upside target of $1900.
Silver has very stiff resistance at $16.00 to $16.50, but it has held support just below $15.00. It has potential upside targets at $17.00 (the 200-day moving average) and $18.00 to $18.50.
Sentiment has not yet reached an extreme for Gold. The net speculative position remains 100K contracts below its peak of ~385K contracts in late February, while open interest is down 38% from its January peak.
Sentiment in Silver suggests the market is near a low rather than a bullish extreme. The net speculative position is near an 11-month low and has declined from 100K contracts in February to 34K contracts. Meanwhile, open interest is at a 6-year low.
Turning to the shares, potential upside targets include GDX $37-$38 and GDXJ $46 and $48.60, the 2013 and 2016 closing high.
The most bullish scenario involves these markets reaching significant multi-year resistance levels: Gold $1900, Silver $18 or $18.50, and GDXJ $48.60. From there, we could finally experience a real correction.
A modestly bullish scenario could entail peaks at GDX $37, GDXJ $46, and Gold $1800.
These are resistance levels to keep in mind to prevent us from getting too bullish should the sector make another push higher.
In the meantime, the more consolidation, the better for the bullish case as long as precious metals maintain current levels.
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