The GDX ETF just moved once again to its recent highs without breaking above them and then declined again (the same goes for the HUI Index), while gold moved a few dollars higher and silver once again outperformed on a very short-term basis. This is a repeat of the bearish indication that we saw in the last few days - miners refuse to rally higher while silver outperforms. The fact that we’re seeing the same kind of signal over and over again only increases its strength.

However, in case of some instruments (like futures) this might have caused the stop-loss orders being triggered. If so, it seems that these positions should be re-entered. Whether this was the case or not, we are adjusting the stop-loss levels for most parts of our current position, as the current levels simply do not fit their description. These are the price levels that should take us automatically out of the market if the rally is so significant that it - by itself - changes the outlook. We are not in this situation right now and we are not very close to it, especially given yesterday’s bullish reversal in the USD Index and other factors that we discussed recently.

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

To summarize:

Trading capital (supplementary part of the portfolio; our opinion): Full short positions (250% of the full position) in gold, silver and mining stocks are justified from the risk/reward perspective with the following stop-loss orders and exit profit-take price levels:

• Gold: profit-take exit price: $1,062; stop-loss: $1,313; initial target price for the DGLD ETN: $82.96; stop-loss for the DGLD ETN $44.97
• Silver: profit-take exit price: $12.32; stop-loss: $16.04; initial target price for the DSLV ETN: $47.67; stop-loss for the DSLV ETN $24.68
• Mining stocks (price levels for the GDX ETF): profit-take exit price: $13.12; stop-loss: $22.03; initial target price for the DUST ETF: $80.97; stop-loss for the DUST ETF $20.37

Note: the above is a specific preparation for a possible sudden price drop, it does not reflect the most likely outcome. You will find a more detailed explanation in our August 1 Alert. 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 target prices:

• GDXJ ETF: profit-take exit price: $17.52; stop-loss: $32.03
• JDST ETF: initial target price: $154.97 stop-loss: $42.17

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
Editor-in-chief, Gold & Silver Fund Manager