Eoin Treacy's view Most gold miners have been expanding production which is expensive and soaked up free cash flow. This trend of investment contributed to their inability to keep pace with gold's advance earlier this year. Although it can be argued that most miners have an average cost of production well below current gold prices that does not mean they will are immune from an additional decline in gold prices. The economics of new production are based on high gold prices being sustained and are likely to be questioned if gold prices remain weak.

The NYSE Arca Gold Bugs Index has been ranging mostly above the 2008 peak since late last year. It found support in the region of the 200-day MA on successive occasions until from early 2009 until May 2011. The Index has subsequently ranged around this trend mean. It failed to hold a breakout to new highs in September and posted a new closing low yesterday. A clear upward dynamic, held for more than a day or two, would be required to check Type-3 top formation completion characteristics.

The Gold / NYSE Arca Gold Bugs Index ratio has been ranging with a mild upward bias since July and is now testing the upper side. A clear downward dynamic would be required to check current scope for further outperformance by the metal. This would suggest that in the event of a breakout by the ratio, gold mining shares will fall faster than the gold price.

GoldCorp, Barrick Gold Corp, Eldorado Gold and Harmony Gold have a similar pattern to the NYSE Arca Gold Bugs Index. Gold Fields, AngloGold Ashanti, Coeur d'Alene Mines and Compania de Minas Buenaventura are falling towards the lower side of lengthy ranges.

Newmont mining broke back below its 200-day MA yesterday and an upward dynamic will be required to check current scope for a further test of underlying trading.

Randgold Resources had been a notable outperformer in the sector but lost momentum and is currently testing the 200-day MA. It will need to find support soon if the medium-term outlook is to remain positive. Yamana Gold has a similar pattern of late.

New Gold Inc. encountered resistance in the region of the 200-day MA three weeks ago and a clear upward dynamic will be required to challenge potential for additional downside.

IAMGold Corp broke downwards from a Type-3 top formation three weeks ago and continues to extend the decline. While somewhat oversold in the short-term a clear upward dynamic would be required to check momentum.

Agnico-Eagle Mines failed to sustain the breakout to new high ground in December 2010 and has trended lower since. It is becoming increasingly oversold but a break in the progression of lower rally highs will be required to question downside potential.

Kinross Gold Corp broke downwards from a more than two-year range in October and continues to extend the decline. Hecla Mining has also been trending consistently lower for most of the year.