Gold has had a rough several months. The precious metal is down some $170 from its peak in April near $1,370, closing today just below $1,200 on the New York COMEX futures market. As we indicated in our last article, gold has failed to maintain the structure that would be indicative of a bull market in progress. That said, no market moves in a straight line, and a reversal will be in store at some point. What are some price projections as gold heads lower over the coming months where we may look to see support emerge?

There are a number of ways to estimate price targets for gold. Established support and resistance zones, Fibonacci retracements, and trend channels are just a few. However, for this article let us focus on a powerful way to gauge the potential for future gold prices – and that is: what the mining complex is expecting.

Miners Gold Price Expectations

Gold mining profits are leveraged to the underlying metal price. When the price of gold rises by 1%, gold miner profits typically rise by 2% – 3%, as the underlying costs to mine the metal remain relatively fixed. The same leverage works to the downside of course. The bottom line is that investors in the gold mining sector should have a solid idea of what the price of gold itself is going to do, as the price is a critical determinant of operational success.

That said, let us examine the figures that the gold miners are now pricing in for their own product. This can be a valuable form of analysis to use any time one is preparing to make a sizeable gold purchase.

Below we show the GDX large-cap gold miners fund on top, with the price of gold immediately below it. The GDX contains an average of approximately 50 different mining operations. Let us examine the relative valuations of the two since late-2015:

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