Briefly: In our opinion no speculative positions are currently justified from the risk/reward perspective.
While it may not sound encouraging, it seems that we once again have very little to report on in today’s alert besides today’s pre-market downswing. Taking the closing prices into account, the precious metals sector and the USD Index have not moved out of their triangle patterns yet, and without a breakout or (more likely) breakdown, we are not likely to see bigger moves.
Good news is that the pattern is about to end, so we will likely see an interesting development that will allow us to enter a speculative position at risk levels that will be much lower than the current ones. Today’s pre-market move lower is encouraging (in terms getting prepared to open short positions), but it’s not as significant as a move during trading hours, and definitely not as significant as daily or weekly closing price. If gold closes today below the triangle pattern we will probably open short positions, but for now that doesn’t seem justified from the risk/reward perspective.
Consequently, since not much changed yet, instead of quoting yesterday’s alert once again, we’ll focus on something else.
The thing that might have changed is the situation in the general stock market. Namely, stocks might have topped While this is may not be directly related to the precious metals market, there could be an indirect link.
As long-term subscribers recall, at times we have shown that when a given market tops, parts of this market – laggards – seem to catch up with the previously outperforming parts. This can be seen on the market and sector level. In the case of the market level, it would mean that the sectors that were performing poorly, start to suddenly perform well, and on the sector level, that would mean that stocks that performed poorly, would perform well.
Now, there’s little or no doubt that mining stocks were one of the worst performing sectors in the past few months. If stocks in general are topping, then perhaps miners’ recent strength is something that heralded it. Consequently, the miners’ strength is not really a bullish sign for the precious metals sector. It could’ve been a bearish sign for the stock market.
All in all, since nothing changed yesterday (yet), we can summarize the current outlook for the precious metals market just as we did yesterday:
Summing up, the final bottom is most likely not yet in, but there are some signs that point to further increases in the very short term (several days). Not all signs, however, suggest strength in the short run and the overall the situation is rather unclear. The medium-term trend remains down, so the surprises should be to the downside and we think that we will see another decline relatively soon. Based on yesterday’s price action in the USD Index, we have something that will help us determine when the risk associated with having a short position decreases significantly. It seems that this will be the case when the USD Index successfully breaks above from the triangle pattern.
By opening short positions now, we would risk being thrown out of them if PMs rallied temporarily and sharply before declining again. Please recall that silver has been known for such counter-trend rallies right before plunging.
As always, we will continue to monitor the situation and report to you – our subscribers – accordingly. We will aim to multiply the recent profits and will quite likely open another trading position shortly – stay tuned.
To summarize:
Trading capital (our opinion): No positions
Long-term capital (our opinion): No positions
Insurance capital (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.
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.
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 always, we'll keep you - our subscribers - updated should our views on the market change. We will continue to send out Gold & Silver Trading Alerts on each trading day and we will send additional Alerts whenever appropriate.
The trading position presented above is the netted version of positions based on subjective signals (opinion) from your Editor, and the automated tools (SP Indicators and the upcoming self-similarity-based tool).
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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We have recently been asked to comment on the upcoming referendum in Switzerland on gold. In particular, we were asked if this could be the turning point for the gold (and other precious metals) market that has been declining for more than 2 years now. The simple law of supply and demand dictates that when the demand for something increases, its price should go up. However, things are rarely simple in the financial markets and it’s definitely not simple in case of gold. Will this be the start of a domino effect and escalation of gold price? We invite you to read today's article with our reply.
Sunshine Profits’ Take on the Swiss Gold Referendum
Earlier today, the Labor Department reported that the initial jobless claims in the week ending November 8 increased by 12,000, missing analysts expectations for a 4,000 rise. Although these disappointing numbers pushed the greenback lower against major currencies, USD/JPY still remains in a consolidation. Is this a sign of strength?
Forex Trading Alert: USD/JPY Takes Breather
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Hand-picked precious-metals-related links:
Global gold demand down at 5-yr low: WGC
India back to being world’s top gold consumer
Anti-corruption campaign cuts demand for gold in China
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In other news:
World Outlook Darkening as 89% in Poll See Europe Deflation Risk
ISIS declares its own currency
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Thank you.
Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
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