Next leg up

GDX rose $0.99 Friday, confirming its breakout from the three-week trading range between $45.96 and the Fibonacci 23.6% retracement level near $42.84 by posting three daily closes above that range. In the process, it negated the potential shooting star of the day before. RSI has broken its downtrend line, and MACD has made a bullish crossover.

The way is now clear for the gold-mining ETF to resume its meteoric rise. As a very rough guide, Fibonacci extensions suggest a short-term target of about $49 and an intermediate-term target near $59.

Traditionally the mining stocks have led gold, so the fact that the GDX:$GOLD ratio is rising is constructive for the price of the metal.

Intriguingly, gold fell $2.90 Friday, closing below Oct. 1's high of $755.70, so Thursday's brief breakout has been negated for now. RSI has been turned back again at 70, and MACD has yet to make a bullish crossover.

Silver, too, has failed to break out of its trading range, between resistance at the Sept. 28 high of $14 and support near the Fibonacci 23.6% retracement level of about $13.31. RSI didn't make it to 70, nor has MACD succeeded in making a bullish crossover.

The U.S. dollar halted its three-day decline on Friday, as the index rose by 0.05 of a point in inverse action to gold.

This week's action should be interesting, as it is unlikely the gold and silver stocks will continue to surge without the metals following closely behind.

In fundamental news, the price of gold could be supported by the prospect of a near-term tightening of supply: The National Union of Mineworkers in South Africa has confirmed plans to strike at the end of the month over concerns about safety in the wake of fatal accidents in the mines of the country that is still the world's No.1 producer of gold.