Gold miners ETF at critical technical juncture: breakout likely.

If gold has broken out, the miners should have bottomed as well.  Here is the weekly chart of the gold miners ETF.  This chart has all the signs of eminent breakout after a very clear a-b-c retracement.  It is now sporting a very nice inclining double bottom which is very bullish should it hold.  The chances of a 50% price improvement from here are above 90% IMO and in fact I think a double is in the cards here.  But before that can be confirmed, the chart needs to break out of the resistance that it is currently facing.  I do not think it is very big resistance and I think it will be quickly broken.

Of important note is the capitulation style volume leading into the bottom but even more important IMO is that the volume continued after the stock began to rise again.  It's like the sellers all sold and then immediately after the bottom, the short sellers began covering and then they were joined in buying by actual longs picking up shares.

GDX will likely run up faster than the physical metal if history serves as a guide.  However, there are good reasons for it.  First off, I think that inflation profits on sale of physical metals will probably be difficult to tax.  That means that the herd will probably not pay taxes on it.  I don't encourage tax evasion, I'm just stating my beliefs about what is happening.  Heck, Obama's cabinet showed us that many of the elite simply don't pay taxes at all until they need to in order to receive their next political appointment.  Also, in states like Utah where gold and silver is money, there is no state tax on gold sales.  But for exchange traded funds like GDX, you will certainly be paying taxes.

Secondly, the market rewards people who take risks (and hammers them if they are wrong about it).  Another way of saying this is that without being paid a risk premium, people will not participate in the market.  I think people are afraid of stocks right now.  Not just because of the economy but because the entire system of corporations, government and military is being shown as corrupt.  People have lost a lot of confidence in government after the releases from WikiLeaks courtesy of Manning and Snowden.  Also the recent NASDAQ shutdown was no accident IMO.  It was more likely a stress test to see how nervous the herd is.  With so many things in the air like this people should require more of a reward before they bet their money in the great casino.  Holding physical metals carries only the risk of being robbed, and that is something that can be managed pretty well.  But having your cash tied up in the markets when something bad happens (like a big terror event such as 911) or as a result of other major events like declaration of martial law, etc. can have you watching your investment crash leaving holding an empty bag.

So, yes, GDX should and probably will outpace physical metal in terms of percentage gain in the coming months.  But be careful about thinking it is the better bet.  Physical metals in your hand are a bird in the hand to GDX's birds in the bush.