Briefly: In our opinion, full (150% of the regular size of the position) speculative long positions in gold, silver and mining stocks are justified from the risk/reward perspective at the moment of publishing this alert.

Nothing really changed in the precious metals market yesterday and it was yet another day when we saw this kind of performance. Seeing that nothing has happened in gold and silver for almost a week may make one think that this is going to continue for a long time. That’s very far from the truth. The price may have not changed much, but something else changed and the odds are that the days of low volatility are ending.

Why? Because the time for the corrective upswing is almost up. Based on the triangle-apex-based reversals and True Seasonality for May, we should be expecting a turnaround on Friday or Monday. The PMs didn’t rally in the past few days, but they showed great strength by not declining despite higher USD Index values. This means that there is little time for the rally and at the same time it’s increasingly likely that the rally will be seen. This implies a bigger move higher in a rather short time. In other words, metals and miners are likely to move sharply higher shortly.

And we may have just seen the technical trigger for this move. The USD Index reversed yesterday, which may signal that we just saw the beginning of a breather in the USD. Even if the pullback in the USD is not huge, it may be enough for the PM market to soar for a few days.

There’s little else to comment on as far as yesterday’s session is concerned.

Consequently, the short-term outlook (for this week) remains up-to-date and the comments that we made previously remain up-to-date as well.

As a reminder, today’s Gold & Silver Trading Alerts is shorter due to your Editors travel schedule, but please note that the market situation justifies very short-term alerts anyway, because very little happened in the past few days.

As always, we will keep you – our subscribers – informed.

To summarize:

Trading capital (supplementary part of the portfolio; our opinion): Full long positions (150% of the full position) in gold, silver and mining stocks are justified from the risk/reward perspective with the following stop-loss orders and initial target price levels:

• Gold: initial target price: $1,338; stop-loss: $1,294; initial target price for the UGLD ETN: $11.68; stop-loss for the UGLD ETN $10.56
• Silver: initial target price: $16.86; stop-loss: $15.94; initial target price for the USLV ETN: $10.68; stop-loss for the USLV ETN $9.12
• Mining stocks (price levels for the GDX ETF): initial target price: $23.78; stop-loss: $21.96; initial target price for the NUGT ETF: $29.78; stop-loss for the NUGT ETF $23.98

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 initial target prices:

• GDXJ ETF: initial target price: $34.78; stop-loss: $31.96
• JNUG ETF: initial target price: $16.88; stop-loss: $13.18

The stop-loss levels are quite far from the current price, but please note that the aim of the stop-loss is to take the investor off the market if the price move by its own is so meaningful that it changes the outlook. Naturally, if things go against us, we will aim to get out of the market much sooner – for instance based on signals from volume or other tools.

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

Important Details for New Subscribers

Whether you already subscribed or not, we encourage you to find out how to make the most of our alerts and read our replies to the most common alert-and-gold-trading-related-questions.

Please note that the in the trading section we describe the situation for the day that the alert is posted. In other words, it we are writing about a speculative position, it means that it is up-to-date on the day it was posted. We are also featuring the initial target prices, so that you can decide whether keeping a position on a given day is something that is in tune with your approach (some moves are too small for medium-term traders and some might appear too big for day-traders).

Plus, you might want to read why our stop-loss orders are usually relatively far from the current price.

Please note that a full position doesn’t mean using all of the capital for a given trade. You will find details on our thoughts on gold portfolio structuring in the Key Insights section on our website.

As a reminder – “initial target price” means exactly that – an “initial” one, it’s not a price level at which we suggest closing positions. If this becomes the case (like it did in the previous trade) we will refer to these levels as levels of exit orders (exactly as we’ve done previously). Stop-loss levels, however, are naturally not “initial”, but something that, in our opinion, might be entered as an order.

Since it is impossible to synchronize target prices and stop-loss levels for all the ETFs and ETNs with the main markets that we provide these levels for (gold, silver and mining stocks – the GDX ETF), the stop-loss levels and target prices for other ETNs and ETF (among other: UGLD, DGLD, USLV, DSLV, NUGT, DUST, JNUG, JDST) are provided as supplementary, and not as “final”. This means that if a stop-loss or a target level is reached for any of the “additional instruments” (DGLD for instance), but not for the “main instrument” (gold in this case), we will view positions in both gold and DGLD as still open and the stop-loss for DGLD would have to be moved lower. On the other hand, if gold moves to a stop-loss level but DGLD doesn’t, then we will view both positions (in gold and DGLD) as closed. In other words, since it’s not possible to be 100% certain that each related instrument moves to a given level when the underlying instrument does, we can’t provide levels that would be binding. The levels that we do provide are our best estimate of the levels that will correspond to the levels in the underlying assets, but it will be the underlying assets that one will need to focus on regarding the signs pointing to closing a given position or keeping it open. We might adjust the levels in the “additional instruments” without adjusting the levels in the “main instruments”, which will simply mean that we have improved our estimation of these levels, not that we changed our outlook on the markets. We are already working on a tool that would update these levels on a daily basis for the most popular ETFs, ETNs and individual mining stocks.

Our preferred ways to invest in and to trade gold along with the reasoning can be found in the how to buy gold section. Additionally, our preferred ETFs and ETNs can be found in our Gold & Silver ETF Ranking.

As a reminder, Gold & Silver Trading Alerts are posted before or on each trading day (we usually post them before the opening bell, but we don't promise doing that each day). If there's anything urgent, we will send you an additional small alert before posting the main one.

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Thank you.

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

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