The rates were raised just like it was widely expected and there’s no surprise here. However, mining stocks huge rally might indeed appear surprising. At least to those who haven’t read our analyses - we warned about today’s volatility and it seems that we were correct to exit the short positions yesterday. It turned out to be the exact short-term bottom.

Where do we go from here? Quoting the final part of today’s first Gold & Silver Trading Alert:

“While the short-term indications on the gold and silver charts support higher prices in the coming days, the mining stock chart has a more neutral character. Miners reversed, just like gold and silver did, but they didn’t close higher and they certainly didn’t show strength relative to gold. If they had, we would probably be opening small long positions today, but without this bullish sign, the outlook still seems too neutral to justify that.

The above, plus the fact that the interest rate announcement is likely to trigger intraday volatility is something that makes us view holding an open trading position quite risky. If we see meaningful confirmations before the interest rate decision (or shortly thereafter), we will send out another alert with details, but at this time it doesn’t seem that any changes to our speculative positions (that is, no positions) are justified.”

In other words, we wrote that if we saw relative strength in the miners, we would probably open small long positions today.

Now, whatever one decides to say about mining stocks performance, one can’t deny that they are showing significant strength so far in today’s session. Consequently, since we have just seen this form of bullish confirmation for the short term, it seems that opening a small (50% of the regular position size) long position in gold, silver and mining stocks is currently justified.

Mining stocks are already substantially higher and silver moved up quite visibly as well, so one might think that the rally is already over, but it seems to us more likely to gold is more likely to rally up to $1,265 - $1,270 before forming a short-term top and this makes subsequent rallies in other parts of the precious metals sector likely as well. We will provide more details in tomorrow’s Gold & Silver Trading Alert.

As always, we’ll keep you – our subscribers – informed.

To summarize:

Trading capital (supplementary part of the portfolio; our opinion): Long positions (50% of the full position) in gold, silver and mining stocks are justified from the risk/reward perspective with the following stop-loss orders and initial targets:

• Gold: initial target level: $1,267; stop-loss: $1,236; initial target level for the UGLD ETN: $10.32; stop-loss for the UGLD ETN $9.38
• Silver: initial target level: $16.48; stop-loss: $15.58; initial target level for the USLV ETN: $11.18; stop-loss for the USLV ETN $8.88
• Mining stocks (price levels for the GDX ETF): initial target level: $22.97; stop-loss: $21.08; initial target level for the NUGT ETF: $30.18; stop-loss for the NUGT ETF $23.78

In case one wants to bet on junior mining stocks' prices (we do not suggest doing so – we think senior mining stocks are more predictable in the case of short-term trades – if one wants to do it anyway, we provide the details), here are the stop-loss details and exit prices:

• GDXJ ETF: initial target level: $33.48 ; stop-loss: $29.78
• JNUG ETF: initial target level: $17.38 ; stop-loss: $11.78

Long-term capital (core part of the portfolio; our opinion): No positions (in other words: cash)

Insurance capital (core part of the portfolio; our opinion): Full position

Thank you.

Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager

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