Gold-Stock Seasonal Plunge

by Adam Hamilton
Zeal LLC

The gold miners’ stocks have just been hammered, plunging to new correction lows. That shattered their indexes’ 50-day moving averages, pounding nails in the coffin of this sector’s recent high consolidation. This necessary correction probably isn’t over yet. It is still small and short compared to this bull market’s precedent, the gold stocks are nowhere near oversold, and they are heading into a seasonal-plunge month.

Seeing the gold stocks rolling over into a correction shouldn’t surprise anyone. They enjoyed a great run, as evident in their leading and dominant sector benchmark the GDX VanEck Vectors Gold Miners ETF. From mid-March’s pandemic stock-panic lows to early August, GDX rocketed 134.1% higher in just 4.8 months! That powerful and fast upleg left gold stocks seriously overbought, necessitating a correction.

That healthy process to rebalance stretched technicals and greedy sentiment began right away. In the first four trading days after GDX peaked at $44.48 in early August, this ETF plunged 12.2%.

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