Gold is back in rally mode.

Two weeks ago, the shiny yellow metal was trading for $1,830 per ounce. It closed at that exact same level on Thursday.

So, why is it all of a sudden in rally mode?

Because the gold stocks are outperforming the metal.

It was also two weeks ago when we looked at the GDX/GOLD ratio chart – which compares the action in gold stocks to the action in gold. We noted that gold tends to do best when the gold stocks outperform the metal.

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Two weeks ago, the ratio chart was falling… and gold stocks were underperforming the metal. But that changed on Thursday.

Take a look at this updated chart…

Chart

This chart has broken above the dashed-red downtrend line – where it was making a series of lower lows and lower highs – which indicates a downtrend. It now has a higher low and a higher high in place – which should signal the start of a new uptrend.

The last time this chart signaled a gold rally was back in March. The price of gold rallied nearly $200 an ounce over the next two months. Something similar this time around would pop the price of gold above $2,000.

Of course, it won’t be a straight shot higher. Gold will have plenty of pullbacks along the way.

But, as long as the gold stocks are outperforming gold – meaning as long as this ratio chart is making higher highs and higher lows – then gold is in rally mode. And, it’ll be higher in the weeks and months ahead.

Traders should use any weakness in the price of the metal as a chance to buy. We’ve started another multi-week rally phase for the price of gold.

Best regards and good trading,

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Jeff Clark

Reader Mailbag

Are you bullish on gold? If so, will you be using this recent weakness in price to buy more gold?

Let us know your thoughts – and any questions you have – at [email protected].