In today’s first alert we wrote that if we see additional bullish confirmations we will consider opening speculative long positions. It seems that we have seen them during today’s session.
The USD Index moved higher - to above 98 and now it’s back to 97.74. Today’s session will likely form a reversal shooting star candlestick, which would be particularly bearish in light of the turning point.
What did gold and silver do in light of the intra-day rally in the USD Index? More or less nothing, which is significant, because they “should” decline given an upswing in the USD. This is a reply of the signals that we’ve seen in the past few days. However, this time, we also saw something else. This time, the mining stocks rallied, outperforming gold. At the moment of writing these words, mining stocks are up by over 3%, even though gold is more or less flat ($2 upswing). This is the sign of strength and it seems that seeing it, along with other bullish indications, makes long positions justified from the risk to reward point of view.
Please note that the above does not change our views on the medium-term picture - gold remains in a medium-term decline, but at this time the counter-trend rally appears to be very probable. Consequently, we will probably exit the long position relatively soon (possibly within a week).
To summarize:
Trading capital (supplementary part of the portfolio; our opinion): Long positions (100% 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: $1,295; stop-loss: $1,237, initial target price for the UGLD ETN: $12.47; stop-loss for the UGLD ETN $10.23
- Silver: initial target price: $18.45; stop-loss: $16.88, initial target price for the USLV ETN: $19.78; stop-loss for the USLV ETN $14.67
- Mining stocks (price levels for the GDX ETF): initial target price: $25.77; stop-loss: $21.77, initial target price for the NUGT ETF: $17.38; stop-loss for the NUGT ETF $9.77
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: $43.87; stop-loss: $35.86
- JNUG ETF: initial target price: $15.87; stop-loss: $8.78
Long-term capital (core part of the portfolio; our opinion): No positions
Insurance capital (core part of the portfolio; our opinion): Full position
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.
Thank you.
Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief, Gold & Silver Fund Manager
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