In short, we are closing the speculative short positions and we are taking the profits off the table. At this time, we think that no speculative position is justified from the risk to reward point of view in gold, silver or mining stocks.
In today’s alert we warned you about today’s decline even though it didn’t seem likely at all when one looked at the USD Index’s reversal. One of the reasons for lower prices was the fact that neither gold, nor silver moved to an important support. Gold, silver and mining stocks declined today and both metals moved to their recent lows. The support levels created by February, March and April lows in case of silver, and February and March lows in case of gold are not as low metals are likely to decline in the coming weeks, but it’s clear that both metals moved to visible support levels.
In light of the above, the cyclical turning points in gold and mining stocks, the apex-based reversal in the euro and relative strength of the miners (they are at their March highs, while gold is at its March low) we think that closing the speculative short positions is now justified from the risk to reward point of view.
As a reminder, we entered the short position on March 7 with gold at $1,331 and silver at $16.63. and we doubled it on March 9th with gold at about $1,324 and silver at about $16.62.
At the moment of writing these words, gold is trading at $1,312 and silver is trading at $16.26. The price is a bit higher in case of the mining stocks, so this part of the position might be in minus, but since both: gold, and silver are profitable, the overall position should be profitable as well. By the way, please keep in mind that the profitability of a position does not determine whether it should be held or not - the outlook does. At this time the outlook for the short term does no longer support short positions, so it seems that the entire position: in gold, silver and mining stocks should be closed.
The above means closing yet another profitable position despite more or less horizontal trend that we've seen this year. We would like to stress that the biggest declines (and rallies) are still ahead and we expect the following trades to be much more profitable than this one.
We expect to re-enter the short positions in the first half of May after we get more bearish signs. We may even enter very short-term long positions in the meantime, but we are not doing so at this time.
Thank you.
Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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