“The multi-year decline has taken the Gold Bugs index down to the bottom of its falling channel where it touched this line last month. As it was touching the bottom of the falling channel, it also hit a key price line that was important resistance in 2002 & 2003 and was support at the financial crisis lows in 2009,” said Kimble.
While low oil prices have been blamed for eroding the inflation-fighting potency of gold, there is no denying that lower fuel prices help the miners. For example, Barrick would save $25 per ounce in production costs if diesel prices stay at current levels.
Investors have remained loyal to miners ETFs this year despite the disappointing price action. GDXJ has added over $1.1 billion in new assets while the Sprott Gold Miners ETF (NYSEArca: SGDM) recently topped $100 million in assets under management after coming to market in July. [Sprott Miners ETF Tops $100M in AUM]
SGDM tracks the Sprott Zacks Gold Miners Index, which seeks to emphasize gold stocks with the highest quarterly revenue growth measured on a year-over-year basis and stronger relative balance sheets as measured by long-term debt to equity,” according to Sprott.
Chart Courtesy: Kimble Charting Solutions