On Oct. 6 (based on the Oct. 5 closing prices - GDX: $15.12) we wrote that exiting the short positions and waiting to re-enter them at higher prices seems justified from the risk/reward point of view. We wrote that we would be monitoring the market for signs of weakness and report to you once we saw them and once we believed that moving back to the short side of the market with the capital dedicated to trading mining stocks was justified from the risk/reward point of view.

At this time it seems that getting back with half of the regular size of the position is justified from the risk/reward point of view.

Gold is forming a bearish reversal candlestick, miners are forming an even more bearish reversal candlestick and are underperforming gold on an intra-day basis. The USD index moved to an important support level and silver’s turning points (yes - not point but points as both the short-term and very long-term cyclical turning points are upon us) support lower PM prices.

The breakouts above the August highs in the case of the GDX and the HUI Index were not invalidated and that’s why we are only re-opening the position using half of the capital that would normally be used to do it.

As always, we will keep you – our subscribers – updated.

To summarize:

Trading capital (our opinion): Short position (full) position in gold and silver and short position (half) in mining stocks is justified from the risk/reward perspective. We will provide detailed stop-loss levels and price targets in tomorrow’s alert.

Long-term capital (our opinion): No positions

Insurance capital (our opinion): Full position

Please note that a full position doesn’t mean using all of the capital for a given trade. You will find details on our thoughts on gold portfolio structuring in the Key Insights section on our website.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

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