Can Gold’s Big Rally Finally Ignite This Languishing Gold Miner?

On Wednesday, the Fed confirmed that multiple rate cuts are still in the cards later this year.

Given gold’s sensitivity to interest rates, the spot gold price soared above $2,220.

That move caps off a big month for gold. It is up around 12% since its February 14 low.

What’s more, gold has now rallied almost 23% since October.

But despite the gold price’s stellar run, gold miners have been left floundering. The world’s largest gold producer, Newmont Corporation (NEM), has recently been trading at multiyear lows.

So today I want to check in on NEM to see if it can snap out of its losing streak…

A Classic Downtrend

The chart of NEM below shows a classic downtrend in action.

NEM has made a series of lower highs and lower lows. The long-term 50-day Moving Average (MA, blue line) steadily dropped.

Newmont Corporation (NEM)

Source: eSignal

Despite NEM’s long-term downtrend, the 10-day MA (red line) shows that there have been plenty of countermoves over that time… Just look at May, August, October, and November.

These countertrend moves coincided with the Relative Strength Index (RSI) reversing from oversold territory (lower grey dashed line).

After these RSI troughs, the MACD (Moving Average Convergence/Divergence) also reversed higher. The blue MACD line bullishly crossed above the orange Signal line. Both lines then tracked higher.

When NEM rallied from its low in November, however, it finally looked like the RSI was going to gain traction in its upper band.

That would finally enable NEM to rally. The RSI also retested and held support (green line) in mid-December.

But that proved to be a false rally. The technical indicators rolled over and headed down.

Take another look:

Newmont Corporation (NEM)

Source: eSignal

As the chart shows…

1. The RSI fell through support and remained stuck in its lower band.

2. The 10-day MA crossed back below the 50-day MA with both tracking lower.

3. The MACD line crossed beneath the Signal line and both fell below the zero line. They flatlined in early February.

In late February, though, a converging pattern set NEM up for a bounce (orange lines).

The rising RSI stopped NEM’s fall and then pushed NEM higher.

The RSI is now back in its upper band, but it’s bouncing along support (red circle). So what should we look for from here?

Holding Support

For NEM’s bounce to develop into a genuine rally, momentum needs to remain positive.

So, the RSI has to keep holding support and track higher into its upper band from here.

Likewise, after converging, the 10-day MA has only recently crossed back above the 50-day MA.

If the 10-day MA continues to accelerate higher and drags the 50-day MA with it, that will add further impetus to any rally.

The other thing I’m watching closely right now is the MACD.

It just recently broke above the zero line. So I’ll also be looking for the MACD line to accelerate above the Signal line, with both continuing to climb. That would be further verification of NEM’s rally.

Regards,

Larry Benedict
Editor, Trading With Larry Benedict