Gold enters the final ten days of 2014 in a very interesting, and far from clear, position. Some observations in no particular order:

  • Gold in US dollar terms is down slightly less than 1% year to date while it has actually had a very good year when priced in other currencies
  • There is a great deal of confluence around the $1200 level (50-day simple moving average, 2013 closing = $1204.80, important break-even level for many gold producers, etc.)
  • Gold has made 3 successive lower highs since topping at $1346.80 during the summer

Gold_Daily_12.21.2014

  • A constructive uptrending channel has formed since the November low at $1130.40
  • The final days of the calendar year are fairly weak historically for the yellow metal

The larger downtrend is powerful and unmistakable - from my vantage point it will take a decisive rally above $1250 to shift the technical structure of the gold chart bullish on short/medium term time frames. It is anyone's guess what gold will do during the final days of 2014, however, some modest weakness between now and New Year's followed by a January rally is our baseline scenario.

As a side note, several mid-tier/junior gold producers were sold down pretty aggressively on Friday (EDV.TO, LSG.TO, OGC.TO, etc.) primarily as a result of rebalancing by the Junior Gold Miners exchange traded fund GDXJ. (Notice the extremely heavy volume in many of these names during Friday's trading session). This rebalancing, combined with year end tax-loss selling (last day for 2014 tax-loss sales for Canadian investors is December 24th) looks to offer a tremendously attractive buying opportunity in select gold producers/explorers over the coming days.

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