Gold Mining Shares having a Strong Day

Barclays, in one of their research notes today, named Goldcorp as one of their top picks for 2014. They cited an expected increase in gold production of some 33% by the end of the year 2015. This is the result of heavy cap-ex in 2013 to bring these various projects to a state of production. They expect that spending will drop considerably in 2014 while gold output increases. The study also cited an expected cost of production at $888/ounce compared to the industry average of $959/ounce.

GG is up some 3.4% as I type these comments. The HUI is actually doing better as it is up some 4.2%.

It is refreshing to finally see some notes like this hitting the beleaguered mining sector. Value-based buying could very well put a bottom in the mining sector. If, and this is a big "IF", the shares stop moving lower, gold, the metal, will not be far behind. I would keep an eye on the reported holdings of the gold ETF, GLD, to see if that bleeding finally has been stemmed and the reported holdings begint to rise. That would be a clue that the worst is over.

Again, the jury is still out on this in my view but the chart action looks encouraging for a change. Even Barrick gapped higher today and is currently up over 5% on the day! It opened sharply higher on a strong gap and then pushed through the 20 day moving average. That is the first time it has been above this level since October 30th!

Note that the ADX has turned lower from a rather lofty level indicating a pause or interruption in the ongoing downtrend. The market could move into a consolidation pattern at these levels with value based buyers perhaps cementing the recent lows just above $15 as a higher secondary bottom from the low made this summer. The stock could conceivably move up to as high as $21.00 or so and still be in a broader range trade. If it were to climb past that level, on decent volume, it would confirm a long term bottom is in.

Barrick's lousy performance has been a type of proxy for the entire sector as a whole so if this stock were to turn and begin a leg higher, the rest of the sector will more than likely go along for the ride as well. Don't forget that just because a stock stops going down does not mean it is going to immediately start a sustained move higher. It could conceivably meander sideways for some time before a catalyst of some sort kicks it up and out of a range trade.

The intermediate term Weekly chart still shows the bears in control of this stock so try not to get too slap happy. Remain objective ( if you can) but enjoy the respite from the selling barrage.