The Fall of Gold and Their Related Sector

Following up on a previous article written about GLD, this article looks at the mining industry that obviously would be directly impacted by the fall in recent capitulation in gold and precious metals.

By now, every investor or trader should have already read or heard about the fall of gold in the commodities market last week. If you haven’t, here’s a recap — let’s look at the charts of the  popular gold ETF, GLD

GLD monthly

Since the peak of August 2011, GLD has dropped about 22%. In fact, the ETF broke its long term uptrend support beginning of 2012 and has been trading sideways since then. Last week’s capitulation was significant when GLD broke the $150 which served as support during the consolidation period. Now that GLD has broken that psychological support, the next question is, how low can it go?

A clue would be the the popular Fibonacci 61.8% retracement level, which is a popular technical analysis tool used by traders. If we measured the Fib from its base of around $45, GLD should find some support around $132 level, which is near a the round number $130 — another psychological support if you like. Like most things in the markets, nothing goes down (or up) in a straight line, so there we could see a short bear market rally at those “round number” levels — the next one being $140 (not shown above).

Often, the price movement in a major commodity like gold will have an effect on stocks of companies involved in the mining or related industry. An ETF that tracks gold miners is the GDX

To find out more about the performance of this gold mining ETF, click here to read the rest of the article.

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