The past week has been a powerful one for gold and gold mining equities:

  • We saw gold dip under $1170 on the first trading day of the year only to reverse $50+ higher during the subsequent 3 sessions
  • The gold miners as measured by the GDX have begun 2015 with a rip roaring 11%+ rally
  • Today’s rally in the miners posted a break out from a 10-week bottoming process

GDX_Daily_1.6.2014

  • Gold now finds itself testing the upper boundary of a multi-week symmetrical triangle

Gold_Daily_1.6.2015

While some short term pullback/consolidation certainly appears to be in order for both gold and the gold miners, the ferocity and steepness of the recent rally reminded me of a similar rally we witnessed during the summer of 2012:

Gold_Summer_2012

As it turned out the July/August/September 2012 gold rally was driven, at least in part, by anticipation of the Fed’s QE3 announcement which occurred on September 13, 2012. Given that there are no clear catalysts for the recent strength in gold (the US dollar has even moved higher), it is likely that some of the strength we have been witnessing over the past few days is driven by anticipation of the ECB announcing QE on January 22nd.

If this is the case we are probably in for another example of buying the rumor and selling the news”. A breakout from the symmetrical triangle in gold will have a measured move target of ~$1300 which is also a logical upside target given that this level was an important battleground throughout 2014. Other important upside levels for gold are $1239 (50% retracement of July-November decline and resistance from December) and $1280 (major support/resistance from last year).

Is gold having déjà vu to August 2012?