Briefly: In our opinion speculative short positions (full) in gold, silver, and mining stocks are justified from the risk/reward perspective.
The precious metals sector paused yesterday, but the lack of decline didn’t make the situation any less bearish. Let’s check why (charts courtesy of http://stockcharts.com.)
Gold declined heavily on Tuesday, so it’s no wonder that we’re seeing a pause. That’s a normal reaction, as no market can move in a straight line for long. There was no move higher and the volume was low – the downtrend seems likely to continue shortly.
We saw the same in the silver market, and there was only a small difference in the case of mining stocks.
Miners somewhat declined and that’s the only difference. The fact that miners declined without a decline in gold and silver and given a daily rally in the general stock market is a bearish sign. Also, the recent sell signal seen in the Stochastic indicator is now more visible as the indicator moved more visibly below its moving average.
Overall, the outlook for the precious metals market remains bearish, and the points made in the previous alerts remain up-to-date.
We were asked to supplement our previous price targets with the ones for the GDXJ ETF (proxy for the junior sector). In our opinion it’s likely that the interim bottom in the GDXJ will be at $30 or close to it and the final bottom at $20 or close to it.
The analogous numbers for the GDX ETF are $21 (interim) and $16 (final) (just our opinion of course, there are no guarantees).
To summarize:
Trading capital (our opinion): speculative short positions (full) in gold, silver, and mining stocks. You will find our take on many trading vehicles in our Precious Metals ETF Ranking.
In our opinion it’s not too late to enter the above-mentioned positions as the initial target levels ($1,210 in gold, $18.60 in silver, and 197 in the HUI Index) are still relatively far away.
Stop-loss details:
- Gold: $1,353
- Silver: $20.86
- GDX ETF: $26.2
Long-term capital: No positions.
Insurance capital: Full position.
Please note that a full speculative position doesn’t mean using all of the speculative capital for this trade. You will find details on our thoughts on gold portfolio structuring in the Key Insights section on our website.
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.
Thank you.
Sincerely,
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts
