Silver and mining stocks have moved higher just a little, but gold is up about $20 today, so you might be wondering if this price action changes our thoughts on the precious metals market and whether it changes our approach toward long-term investments. In short, it doesn’t. Since it is only gold that is moving higher, its move is not confirmed. Moreover, the volume on which the mining stocks are moving is very small at this time, so we remain skeptical about this rally’s sustainability.

Please note that we wrote that only half of the regular short position size seems justified from the risk / reward perspective, not the full one and today’s reaction seems to prove that being cautious was a good idea. What’s next? Since the signals that we described in today’s first alert remain up-to-date and the outlook remains bearish (despite today’s move higher), we still think that small (half) short position in the precious metals sector remains justified from the risk / reward perspective.

We think that there will have a major buying opportunity in the precious metals sector later this year, but it is not here just yet. Today’s move higher seems to be another counter-trend bounce and not a beginning of a major move higher.

We will keep you updated.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief

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