Gold is under pressure after it couldn’t break above the previous major top and the gold stocks couldn’t escape the same fate. Last time I filtered the gold stocks by ROE and in this piece, I would like to make an update on their price performance for you.
To remind you, the top stock tickers are ABX (Barrick Gold), SBGL (Sibanye Gold), IAG (IAMGOLD), GSS (Golden Star) and HMY (Harmony Gold Mining).
Chart 1. Top Gold Stocks Vs. Gold: The Brightest Star Is The Golden Star
Chart courtesy of tradingview.com
Gold topped on the 8th of September at the $1357 level, and that’s where I have started the chart. Gold (black) lost more than 4% from that peak. Three of the five stocks lost more in price than gold did: HMY (green) fell for more than 13%, your favorite (see chart #3) ABX (red) dropped almost 21%, and the worst performer is IAG (purple) with -21% drop, which was the top gainer in the previous update.
Barrick Gold surprised me the most out of this trinity as it has been accurately following the gold in the last six months but now diverged heavily. This again proves that fear is the most potent emotion as panic or sometimes frustration makes investors get rid of the stock earlier than they should. They could be right at the end of the day as gold doesn’t shine this fall, but this distortion just shows the amount of fear in the market.
Sibanye Gold (SBGL, orange) had the best chart structure in the previous update. In spite of this, it suffered losses at almost -4%, slightly surpassing the gold. The graph line of this ticker is very volatile as at the start it dipped below -20% and then gradually restored almost all losses.
Golden Star (GSS, blue) gained a hefty 10% despite the drop in the metal price. This stock was the top loser last time, and now it is not only the leader but the only gainer from the pack. Escaped from the fate? Let’s see it in the chart below.
Chart 2. Golden Star (GSS) Weekly: Complex Consolidation
Chart courtesy of tradingview.com
I think that the current chart structure for GSS remains to be poor as this stock is definitely in the long-running sideways consolidation from the last summer. I highlighted the strong move to the upside in 2016 with the callout to show you what good growth structure looks like. And its opposite we have now in the last leg underlined with the black trendline support. The choppy candlesticks changing each other, show market nervousness and indecision.
In my opinion, the stock is now in a counter-trend correction within the larger consolidation highlighted with the red downtrend channel. Why counter-trend correction? Because the main move currently is to the downside. You can see it for yourselves – the first drop was big and fast, it took only several weeks. The rest of the time we have zigzags up and down without any significant shift in the price range as we are still between the $0.67 and the $1.13 marks established long ago. These consolidations are nasty as they consume time and try our nerves.
To finish the consolidation, the stock could see another drop to the downside (red arrow) of the channel where two Fibonacci retracement levels appear as supports between the $0.35 (78.6%) and the $0.52 (61.8%) marks. It should break below the black support first to proceed to the north. This consolidation accords with the gold chart structure posted last week.
The price should overcome two resistances to return the credit from investors: the first is located at the previous top ($1.01) and the second and the most important is the major top ($1.13).
Below are the results of the last vote for the top gold stocks.
Chart 3. Last vote results
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Aibek Burabayev
INO.com Contributor, Metals
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
I, and many others would vote GSS, but it's mysteriously absent the choices.
Hi CD,
I have corrected the Poll to include GSS.
Best,
Jeremy
My favorite is GSS - Golden Star which you did not include in your selection...
Hi Angelo,
I have corrected the Poll to include GSS.
Best,
Jeremy