In short, in light of today's price moves, we are keeping the current trading positions intact.
After a quick decline, gold and silver reversed and rallied with vengeance. The rally in metals ignited a very sharp and very visible upswing in mining stocks. Was this a game-changer? Will PMs and miners soar further in the upcoming weeks?
Not necessarily. What happened today is one of the possibilities that we outlined earlier for the current correction. In Monday’s alert, we wrote the following about the mining stocks based on the analysis of gold and the gold stocks to gold ratio:
“From the short-term point of view, however, we also saw a reversal and it would not be uncommon for the breakdown below the 2016 and 2017 lows to be verified by a move back to them. In the above case, and assuming gold at $1,327, we can look for GDX at about $22.50 before the decline is resumed. With gold at $1,345, GDX could be at about $22.85.”
At the moment of writing these words, gold is trading at $1,348 and GDX is trading at $22.84. Both are slightly above the above-mentioned upside target levels. Silver is at $16.77 - also only a bit above our target of $16.70.
The USD Index is trading at about 89.35 (the intraday low was 89.23) and it seems to be on its way to reaching the target that we described in today’s alert - the 89.11 level.
Today’s session could mean the end of the corrective upswing, but it’s not 100% clear yet. We’ve been considering adding to our short positions because our targets were reached or almost reached (USD), but we finally decided to leave the regular short positions intact. The reason is that mining stocks are clearly outperforming silver so far today and we would prefer to see the opposite before committing more than 100% of the regular position size to a trade.
At this moment, the medium-term outlook remains down.
The situation could change and if it does, we’ll keep you - our subscribers - informed.
Thank you.
Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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