Watch for a short-term bounce of gold mining

Is there anyone out there to be interested in gold today? Quite a few, if not none. It has been almost like a dead blow to gold in the past week or so when it has been dropping off the cliff just within a few days. Yes, it is very painful for those who hold gold, especially gold mining stocks. From a long-term perspective, I think gold is very close to its bottom and when it starts to rise, it could be a fantastic run in the next few years. But in the short term, the severe damage has been done too much to the sector and we cannot expect it will simply recover in a sustainable fashion with one or two attempts. However, it anyone wants to catch up a “dead cat” bounce, you may get a chance next week. Gold has been way too oversold at the moment and is due for a significant bounce for at least a very short period of time. If so, the mining stocks will lead. Today’s intra-day reversal of gold price was a strong indicator that this short-term bounce may start now. If I’m right, mining stocks will be doing better than gold itself, given how oversold they are in general. Buying some GDX is one way to go.

Of course, let me be very clear, gold may likely be not yet at the exact bottom and any bounce may likely be temporary and will come down again to test its recent low. Same for mining. So this has to be a very quick trade for anyone who is able to execute fast. You should be willing to take profits quickly, probably just within a couple of days,  if you are lucky enough to have some good profits. It could be substantial but the risk is of course also big. Trade accordingly.