We received several requests to comment on the move above $23 in the GDX and thus, we deliver.

Today’s rally in the mining stocks may seem like the end of the world or at least like a tremendous change in the situation on the precious metals world. In reality, however, it’s something that we’ve seen multiple times - only not very recently.

The last big and volatile downswing that was followed by a sharp upswing in GDX was seen in February and March 2017. The upswing took miners to about 50% Fibonacci retracement, before stopping. The preceding similar situations took place in the second half of 2016. When GDX declined sharply in August, it rallied back up just a little above the 50% Fibonacci retracement. The decline that started in September corrected initially to the 38.2% retracement, but ended only after miners moved a bit above the 50% retracement. The November decline was corrected to the 38.2% retracement.

At this time, GDX corrected a bit more than 50% of the recent sharp decline, which is well in line with the historical norms for a volatile corrective upswing WITHIN a bigger decline. In other words, even though the mining stocks are up by about 5% today, it’s not necessarily a bullish sign.

It was certainly a good idea for us to slash the short positions in half right after Friday’s reversal and take half of the profits home, but please note that if we attempted to completely exit the position very often, we would also likely miss some of the bigger declines. So, the decision to stay somewhat short is still justified - the last several alerts feature multiple signs that point to lower prices in the following weeks, so the bigger surprises are likely to be to the downside. Plus, at the moment of writing these words, the USD Index is trading precisely at 89.11. This may be the turning point of today’s session or we might be very close to it.

But, is it high time to add to the short position? No - silver did outperform gold a bit in the last hour or so, but that doesn’t seem significant enough to be viewed as a new short-term bearish confirmation.

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

Thank you.

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

Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts