Price Action Suggests Gold Miners in a Down-Trend/Bear Market; Next Stop ~15%-20% Lower?

There aren’t many places to hide these days.

Short of bonds, the USD, staples, utilities and bio-techs, it’s tough to find favorable price action in much of anything.

This is true too for the Gold Miners Index, presented on a monthly and weekly basis below.

The first chart is monthly.  Note the 12 month moving average (MA) of the Gold Miners Index is negatively sloped and prices are below that MA.

In the past, when the 12 month MA has been positioned similarly it has been indicative of the miners being in a down-trend/bear market.

This type of positioning has happened twice since the earlier 90s – both included peak to trough declines in the index of ~70%-75%.  One such decline took multiple years, the other was fast in the 2008/2009 panic.

As of right now, the Gold Miners Index is ~35% off its September 2011 high.  A similar decline off that peak (i.e., 70%) would take the index to ~550.

On the weekly chart below, support lines (1) and (2) come into play at ~1,000, or ~15%-20% below current prices.

If miners are in a down-trend, this is likely the first place any bounce could materialize.

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