Time to look at gold mining stocks?

Brazil, China and India are seeing their respective economies slowing, while Russia could be heading for a revolution and the European Union is neck high in debt with Greece circling the drain.If that wasn’t enough to send traders to safe haven assets, America is now suggesting its economy is slowing as well. There’s been a spike higher in unemployment for the first time in seven straight months, and a considerable slowing in building requests.

This week will be packed full of economic data from frontier markets to emerging markets to developed markets, giving traders a good look at how the global economy is faring.

Global markets are likely to react to the euro zone issues and the U.S. markets as they look to larger developed regions for leadership and to keep the global economic engine ticking along. 

Looking at the S&P 500 daily chart, you’ll find price has begun to roll over as we hover above the support level of $1,270 and on the 5th leg of an Elliott Wave, suggesting the S&P 500 is in for a reversal to the downside. To see the whole picture look at the daily five year chart. 

This is inherently bad for global markets but could very well be welcoming news for gold mining stocks.

Gold has fallen out of favor since September when it reached a record high of $1,900 a troy ounce. Even though it has now fallen to the $1,570 level, gold’s record continues to speak for itself with a 137% return in the past five years.

However, the same cannot be said for gold mining stocks. They have been down and at best sideways, and are now trading at historic low levels compared to the commodity itself. One would think they cannot stay like that forever.

In fact we are beginning to see a breakout in the world’s second largest gold mining stock, Newmont Mining (NEM, quote).

NEM was knocked down hard but has now bounced off its 52 week low, breaking above the downward trendline and has now begun to climb.

NEM is currently trading around 13 times 2013 earnings estimates and if the euro zone crisis continues, Greece continues on its path to default and/or exit, and even worse, if Germany leaves the euro zone(!), price action could break above the $50.00 resistance level and nothing technically stands in the way of this gold mining stock until the $58.00 -$58.25 level.