GOLD SHARES ARE RISING WITH THE METAL -- AND ARE NEARING A TEST OF 2019 HIGHS -- THE FACT THAT GOLD MINERS ARE RISING FASTER THAN BULLION IS ANOTHER POSITIVE SIGN

GOLD MINERS ETF NEARS TEST OF 2019 HIGH...Yesterday's message wrote about the price of gold being in the late stages of a potential bottoming formation. It also suggested that three intermarket forces were working in gold's favor. They include a weaker dollar, falling interest rates, and investor concerns about the stock market. The message pointed out that gold prices have rallied over the past year when stock prices have weakened. Investors have been gravitating toward gold and other traditional safe havens in recent months to hedge against economic headwinds from a potential trade war and an aging bull market in stocks that's the longest in history. There's another intermarket factor that's starting to work in gold's favor. And that's the fact that gold mining stocks are starting to rise faster than the commodity. That's usually a positive sign for both.

GOLD MINERS ARE OUTPACING GOLD..The daily bars in Chart 1 show the VanEck Vectors Gold Miners ETF (GDX) rising toward its 2019 highs (as is the price of gold). The GDX bounced off its 200-day average during May and has risen above its 50-day line since then. The bigger green volume bars at the bottom of Chart 1 also show that buying pressure is picking up. Gold stocks are also gaining ground faster than bullion. That can be seen by the rising GDX/GLD ratio in the middle box. Gold miners have outpaced gold on a relative basis since last September. That's what usually happens when investors start investing in gold assets. Historically, gold miners rise faster than the commodity in a gold uptrend. The top box shows the GDX also rising faster than the S&P 500 since last autumn. Obviously, an upside breakout by gold miners would be a positive sign for them. But it would also be a strong sign for the price of gold. As a rule, an upside breakout in either one should be confirmed by an upside breakout in the other.

BOTH USUALLY TREND TOGETHER... Chart 2 compares the Gold SPDR (gold bars) to the Gold Miners Index (brown bars) over the past six years. It's clear that they both usually trend in the same direction. Both of them bottomed together in late 2015, rallied sharply together during 2016, and have traded sideways together since then. They rallied together during the fourth quarter and the past month. A second conclusion can be drawn from the GDX/GLD ratio in the upper box. That falling relative strength ratio prior to 2015 shows gold stocks underperforming while the price of gold was falling; the rising ratio shows miners leading bullion higher during 2016 when gold prices were rising. Miners have also been doing better than gold since last autumn and over the last month. The fact that both are rising is a good sign. The added fact that miners are rising faster is even better.

GOLD MINERS APPEAR TO BE BOTTOMING...Yesterday's message showed a longer-range chart of gold which looked like a major bottom being formed. The monthly bars in Chart 3 show the VanEck Vectors Gold Miners ETF (GDX) also forming a potential bottom formation. The sharp upturn during 2016 ended the downtrend that started in 2011. Since its 2016 peak, the GDX has trended sideways in a "falling wedge" pattern. That pattern is marked by two falling (and converging) trendlines between mid-2016 and 2018, and is usually a bullish pattern. The circled area shows the GDX rising above the upper trendline during January which is a bullish sign. After pulling back to the upper trendline, the GDX is rising again during June. Which suggests that the two and half year period of consolidation has probably ended, and that prices are headed higher.

A CLOSER LOOK AT BULLISH WEDGE PATTERN..The weekly bars in Chart 4 give a closer look at the bullish wedge formation shown in Chart 3 on the Gold Miners ETF (GDX). The falling wedge price pattern is confined between two converging trendlines that have been falling since mid-2016. That bullish pattern is usually resolved on the upside. And it was during January when the GDX price rose decisively above the upper trendline. That upside breakout was confirmed when a subsequent pullback between February and May bounced off the upper trendline before rallying into June. That's a classic example of a broken resistance line turning into a new support line. That's what should happen in an emerging uptrend.