Friday’s decline in gold and gold stocks is a buying opportunity.

Okay… I know. Last Thursday I wrote, “The gold stock rally begins today.” So, after Friday’s drubbing, I spent a good amount of the weekend wiping the egg off of my face.

But remember what else I wrote on Thursday. Gold tends to make an important bottom somewhere in the April-June timeframe. Then it rallies into August and September.

Going into last week’s Federal Open Market Committee (FOMC) meeting, my concern was whether the 1281 low gold hit in May was the bottom, or if gold had to revisit that level one more time – probably following the FOMC statement on Wednesday.

When gold held up on Wednesday, and then rallied yesterday, I figured the May bottom was THE bottom, and we had the “all clear” to jump into gold.

I should have known the market wouldn’t make it that easy.

There was probably a good deal of option expiration-related selling pressure in gold and gold stocks going on Friday. If so, Friday’s decline should be short-lived and should reverse early this week.

Plus, the good thing about Friday’s decline in the price of gold is that it set up some positive divergence on the daily chart. Take a look…

One of the things that bothered me about the “bottom” in May was that this daily chart had no signs of positive divergence. In other words, as the price of gold was falling in May, all of the various technical indicators were falling right along with it.

That’s not the case on this decline.

Gold dropped to a new low for 2018 on Friday. Notice, though, how all of the technical indicators are holding above their previous low points. This “positive divergence” is often an early warning sign of a reversal.

So, I’m sticking with the main premise of what I wrote last Thursday. I may have missed the start of the gold rally by a day or two (or three). But June declines in gold have historically given traders a chance to increase exposure going into a seasonally strong period. I suspect that will prove to be the case for this recent decline as well.

Best regards and good trading,

Jeff Clark

Editor’s note: For those interested in how the Delta Report has performed since it started early last year, we recently added the full track record to the website. Anyone can access it right here. And feel free to shoot over an email, telling us what you think.

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