Via Energy and Gold.com:

Last week was a messy one for the gold miners. It began with yet another failure to break-out above resistance followed by what was shaping up to be a steep decline before buyers stepped in and price closed down a modest 1.48% for the week. While the price action remains messy, the gold miners are still in an uptrend and continue to display impressive relative strength:

 

GDX_Daily_5.10.2015

The most intriguing aspect of the recent uptrend in the miners is that gold continues to trade quite poorly as price remains mired below $1200/ounce on its way to a 3rd consecutive monthly close below this key round number level:

 

Gold_Weekly

A few possible explanations for the relative strength in the miners:

  • Equities offer optionality to higher gold prices in the future
  • The senior gold producers have right-sized their operating cost structure during the recent gold price downturn - thus, they are better able to handle a sub-$1200 gold price and are poised to fully capitalize during a rising gold price environment
  • The relatively low volatility we have witnessed in gold in recent weeks (roughly a $50 range during the last 2 months and an 11.56% drop in gold implied volatility on Friday following the jobs numbers) may have helped allay investors' worst fears of a large gold price decline to below $1,000/ounce