The rally in Barrick Gold Corp. shares that started in early August is starting to falter and charts are suggesting it may be time for investors to take some profits.
Canada's largest gold company is still up nearly 25 per cent from the start of last month, when gold producers and the metal itself gained traction on speculation the latest bond-buying measures by European and U.S. central banks could ignite inflation.
But that eurphoria in the gold sector has subsided over the last few days, especially as the latest data from the U.S. and elsewhere showed little sign that inflation was flaring up, even with past quantitative easing measures.
Technical analysts at National Bank Financial note that chart resistance near $42 has been able to hold and momentum indicators have already turned down.
Barrick's performance relative to its peer group also signals caution, notes National Bank. It was one of the last gold stocks to bottom earlier this summer and, unlike other producers, it is still trading below its June highs.
"Risk/reward is starting to favour the bears," the National Bank analysts said. That's especially the case if the NYSE Arca Gold Bugs Index, an equal-dollar weighted index of companies involved in gold mining, breaks down below key support at 495, they said. Today, it's sitting near 501.
Key near-term support for gold is $1,755 (U.S.), followed by $1,728, and breaking below one or both levels could act as a catalyst for the gold miner index to break below 495, according to National Bank.
See the technical chart for Barrick here.