Gold has lost 1.5 pct since last week's close. The French election outcome supported risk assets, and traditional safe havens like gold, Treasuries and the yen got sold off.
Our research team forecast that gold was close to a new bullish or bearish trend, based on the chart setup seen in that article. Just three weeks after that forecast, the first bearish sign in the VanEck Vectors Gold Miners ETF (NYSE:GDX) became visible: VanEck Vectors Junior Gold Miners ETF (NYSE:GDXJ) is weakening against GDX, and that is a sign of less appetite for junior gold miners—a bearish sign for the whole sector.
There is a high chance that this is the start of a new bearish trend in precious metals, at least a tactical bear market, after spring 2016's tactical bull market.
From a secular perspective, gold, silver and miners are still in a long-term bear market, notwithstanding tactical interim bull markets.
From a tactical point of view, we see a new bear market given that GDX was not able to pierce through the strong resistance area indicated in light red on the chart below. That area was identified a long time ago as THE most important price area for gold miners, and, hence, the whole precious metals sector (given that miners tend to lead the metals). That was explained in more detail in the article linked to below, released in January, showing GDX's resistance area.
Given the current chart setup, and the increased appetite for risk assets after the French election, we see GDX falling to 17.50 points, which is the secular support level indicated with the purple line. That's a 25-percent decline from current levels.
If that scenario were to come true, it is likely to offer a great entry point since it would set a higher low compared to January 2016. This scenario is also in line with our gold miners forecast 2017.
