Junior Miners: New Yearly Lows! Will We See A Further Drop

1. Junior Miners: New Yearly
Lows! Will We See A
Further Drop?

2. Points To Be Covered Today:
• GDXJ To Short The Pms
• GDX ETF (Senior Gold Miners)
• Junior Miners Underperform Seniors
• Gold Price Targets Levels
• Gold (XAU/USD) Pares Intraday Losses
• Gold (XAU/USD) Struggles To Defend The $1,800 Threshold

3. GDXJ To Short The Pms
• It seems that choosing GDXJ to short the PMs was a
good decision – juniors closed the day at new 2021
lows.
• Will our profits only grow from now on?
• Gold’s yesterday’s intraday attempt to rally was not
bullish.
• On the contrary, it was what usually happens right
before a big slide.
• Especially given the USDX’s breakout.

4. GDXJ To Short The Pms - I

5. USD Index
• Yesterday there was a second session in a row when the USD
Index closed above the neck level of the broad (~yearly) inverse
head-and-shoulders pattern.
• Furthermore, it’s been moving slightly higher in today’s session,
at least so far.
• This is a very bullish price action – the USDX’s breakout was
not accidental, nor was it based on geopolitical news (the latter
tends to trigger temporary moves that are then reversed).
Additionally, it was preceded by a consolidation.

6. USDX Is Likely To Rally
• Consequently, it seems that this breakout has a huge chance of
being confirmed (we need just one more – today’s – daily close)
and followed by another sharp rally.
• The previous highs at about 94.5 are the initial upside target,
but based on the inverse H&S pattern, the USDX is likely to
rally to about 98.
• Therefore, what just happened (the breakout above the
formation’s neckline) has really bullish implications for the U.S.
currency.
• And since the latter tends to move in the opposite direction to
gold, silver, and mining stocks, it’s also very bearish for them.

7. GDX ETF (Senior Gold Miners)
• That would be enough on its own to make the outlook for the PMs bearish,
but we have many more bearish indications, and some of them are truly
profound.
• The most bearish confirmation of the bearish price prediction for
gold doesn’t come from the USD Index but from the extreme
underperformance of gold stocks relative to gold.
• The GDX ETF (senior gold miners) moved below the recent lows, and it
closed the day below the neck level of a head-and-shoulders pattern
based on the 4-hour candlestick chart.
• At the same time, the GLD ETF is still relatively close to the middle of its
previous decline. If the comparison is still unclear, please consider the
mid-May bottom.
• The GLD ETF closed just slightly below it, while the GDX a few dollars
below it.

8. Gold Miners ETF

9. GDXJ

10. GDXJ Is Below Its Previous 2021
• Junior miners declined not only below the neck level of the recent head-
and-shoulders pattern (very clearly in both: intraday and closing price
terms), but they actually closed the day at new 2021 lows! And they didn’t
invalidate this breakdown yesterday, despite the intraday attempt!
• There are two markets that primarily impact the performance of the junior
mining stocks. One is gold, and the other is the general stock market. Gold
is now about $140 above its 2021 lows, while the S&P 500 is over 16%
above its 2021 highs.
• And yet, the GDXJ is below its previous 2021 lows. It seems that choosing
junior miners as a proxy for shorting the precious metals sector was a
good decision – our profits are rising rapidly, and it seems that they are
going to soar much more in the following weeks.
• What’s more, juniors are underperforming senior gold miners too. You can
see that by comparing the two previous charts and by examining their
ratio.

11. GDXJ:GDX

12. Junior Miners Underperform Seniors
• The ratio declines when junior miners underperform seniors. This happens
often when the general stock market declines – juniors are more
correlated with the latter than the seniors. Interestingly, juniors
underperformed recently, even while stocks were strong.
• If the general stock market declines from here, the underperformance is
likely to take an epic form – just as it did in early 2020.
• This level of underperformance and weakness is truly breathtaking.
• If miners – in particular, juniors – were able to decline so much
without meaningful help from gold and the general stock market, just
imagine the carnage they will suffer once this “help” finally arrives.
• And given the breakout above the neck level of the inverse head-and-
shoulders pattern in the USD Index, it seems like the key trigger to set the
wheels in motion is already here.

13. Gold Extended The Previous Day's Rejection
• Gold extended the previous day's rejection slide from the very important 200-
day SMA and witnessed some follow-through selling on Wednesday.
• The downward trajectory dragged the commodity to over one-week lows,
around the $1,795 region in the last hour and was sponsored by a
combination of factors.
• As investors assess the economic impact of the fast-spreading Delta variant
of the coronavirus, a positive tone around the equity markets acted as a
headwind for the safe-haven XAU/USD.

14. Gold Price Targets Levels
• Gold price targets levels sub-$1800 as USD remains in a win-win situation.
• The risk-on flow was reinforced by a strong follow-through uptick in the US
Treasury bond yields, which further contributed to driving flows away from the
non-yielding gold.
• In fact, the yield on the benchmark 10-year US government bond shot to fresh
weekly tops and underpinned the US dollar.
• This, in turn, was seen as another factor exerting some downward pressure
on dollar-denominated commodities, including gold.

15. Broader Market Risk Sentiment
• In the absence of any major market-moving economic releases from the US, the broader market risk
sentiment will play a key role in influencing the commodity. Traders might further take cues from the US
bond yields and the USD price dynamics to grab some short-term opportunities around gold.
• Previous update: Gold price is extending previous losses following the rejection at the critical SMA200 one-
day resistance at $1825. The rebound in the US Treasury yields is weighing on the yieldless gold amid
risk-on sentiment, as the European market rises on strong earnings and positive close on Wall Street
overnight.
• Meanwhile, broad-based US dollar strength also keeps gold price undermined, with the Delta covid variant
concerns boosting the dollar’s safe-haven appeal. The greenback also draws support from the uptick in the
yields, as the focus now shifts towards the US Senate’s early test vote on President Joe Biden’s
infrastructure bill.
• Gold’s fate hinges on the outcome of the key vote due later in the day and the dynamics in the yield and
the dollar amid incoming virus updates and earrings reports.
• For now, the King dollar remains in a win-win situation, as a drive for safety remains in the backdrop.

16. Gold Price: Key Levels To Watch
• The Technical Confluences Detector shows that gold price is heading towards minor support
around $1802, which is the convergence of the pivot point one-day S1, Bollinger Band four-hour
Lower.
• A sharp drop towards Bollinger Band one-day Middle at $1796 cannot be ruled on a breach of the
latter.
• The sellers will then need to clear a dense cluster of support levels around $1793, where the
SMA100 one-day, pivot point one-day S2 and the previous week’s low meet.
• The intersection of the Fibonacci 23.6% one-month and pivot point one-week S1 at $1790 will test
the bearish commitments.
• Alternatively, recapturing $1809 barrier (Fibonacci 61.8% one-week) is critical to initiate any
meaningful recovery towards powerful resistance at $1814, SMA200 four-hour and Fibonacci 38.2%
one-month coincide.
• Acceptance above the latter will call for a test of the $1819 level, the confluence of the SMA5 one-
day and Fibonacci 38.2% one-week.

17. Here Is How It Looks On The Tool

18. Gold (XAU/USD) Pares Intraday Losses
• Gold (XAU/USD) pares intraday losses around $1,809, down 0.05% on a day,
heading into Wednesday’s European session. In doing so, the yellow metal bears
the burden of the US dollar strength amid the coronavirus woes. However, the
sellers are hesitant amid infrastructure spending updates from US Senators.
• Australia and Indonesia are among the economies, unfortunately, badly hit by the
Delta covid variant. Japan and the UK are also in the line whereas a US-based
research organization raised doubts over Indian covid numbers and jabbing. On the
other hand, Democratic Senator Joe Manchin hinted that sides “Not that far apart” in
infrastructure talks, ahead of today’s procedural voting. It’s worth noting that the US-
China tussles and grim outlook over the Western unlock also put a safe-haven bid
under the USD, indirectly weighing on the gold.

19. Gold (XAU/USD) Struggles To Defend The $1,800 Threshold
• Gold (XAU/USD) struggles to defend the $1,800 threshold, grinds lower around
$1,809, as of Wednesday’s Asian session trading gains momentum.
• The yellow metal refreshed weekly high the previous day before stepping back from
$1,825, providing a daily negative closing.
• In doing so, the gold traders failed to conquer the key technical levels, namely
multi-day-old resistance line and 200-DMA.
• Optimism surrounding US President Joe Biden’s infrastructure spending bill and
hopes of a strong Q2 earnings season could be cited as the key catalyst for the risk-
on mood.
• Also on the positive side were the increasing odds for the Fed policymakers to
defend easy money amid Delta covid strain woes.

20. Junior Miners: New Yearly
Lows! Will We See A
Further Drop?

21. THANKS FOR LISTENING
Junior Miners: New Yearly Lows! Will We See A Further Drop?