Gold and silver moved to new yearly lows today, further increasing our profits from the current short position, but the mining stocks are almost unchanged. This appears to be strength of the latter relative to gold and thus a bullish sign. Consequently, you may be wondering, if this is indeed a sign to close the short position and take profits off the table.

In our view, it’s too early to do so due to combination of two reasons:

• There are so many bearish confirmations in place right now that it would take a meaningful bullish sign to make the situation neutral
• We’ve seen strength in the mining stocks for only 3.5 hours. That’s not even a daily show of strength and it would take more than just one day to invalidate the previous short-term weakness and cause another breakout in the mining stocks to gold ratios. The GDX to GLD ratio moved higher, but compared to the size of the decline in the ratio that we saw this month, it appears to be just a correction that’s quite in tune with what happened in case of other declines (we’ll show you details in tomorrow’s regular Gold & Silver Trading Alert).

In other words, it’s too early to say that anything changed regarding the situation in the GDX to GLD ratio and it’s way too early to say that the outlook for the entire precious metals sector changed. Consequently, for now, the outlook remains bearish and keeping the short positions intact seems to be justified from the risk to reward point of view.

As always, 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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