We summarized today’s first alert by saying that a small short position in gold, silver and mining stocks is justified from the risk to reward point of view and we wrote that If we get additional bearish confirmations, it’s likely that we will increase the size of the position.

Did we just see such confirmation? It’s still not a perfect bearish case like the one we had before the previous decline (when we decided to open a short position with 150% of our regular position), but we think the risk to reward ratio became more favorable based on what we’re seeing today and thus we think doubling the size of the short position (moving from “half” to “full”) is currently justified from the risk to reward point of view.

Why? The rally in the USD Index is now even bigger and now the breakout / invalidation of previous breakdown is clearly visible (and it will likely be the case also based on today’s closing prices), silver outperformed gold on a very short-term basis once again, moving the upper part of our target area, and mining stocks declined. Now, the decline is not huge, but the fact that it is bigger than gold’s decline (percentage-wise - more than twice) despite (!) a quite big move higher in the main stock indices is a sign of underperformance. It is not as crystal clear as we would like it to be, but still, it’s here and the situation in silver and USD now has even more bearish implications for the precious metals sector than it was the case just several hours ago.

To summarize:

Trading capital (our opinion): Short positions (full) in gold, silver and mining stocks are justified from the risk/reward perspective. The target levels and stop-loss details remain unchanged.

Long-term capital (our opinion): No positions

Insurance capital (our opinion): Full position

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

Thank you.

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

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