Briefly: In our opinion small (half of the regular position) long positions in gold, silver and mining stocks are justified from the risk/reward perspective.

Gold declined for days but we finally saw something else yesterday – gold moved higher. Is the bottom in?

This could be the case, but only when we are discussing the short-term price swings. Generally, not much changed yesterday and the only thing that we can comment on happened on the gold chart. Before we feature it, let’s take a one more look at the long-term USD Index picture (charts courtesy of http://stockcharts.com.)

There was nothing that changed in the USD Index in the last several days. The point here is that the USD Index is still likely to correct based on the resistance line that was just reached. The decline in the USD Index is still likely to cause gold, silver, and mining stocks to move temporarily higher.

Meanwhile, gold moved higher yesterday, but the move took place on relatively low volume and gold just moved to the June bottom and moved back down. At this time the move higher is not a sign of strength even though gold has indeed closed higher than on the previous trading day.

Based on the RSI indicator gold is likely to move higher shortly and since the breakdown below the June low was not yet verified by 3 closes below it, we could see a turnaround very soon. The most important factor that is likely to trigger a move higher in gold was already featured – the strong, long-term resistance in the USD Index.

All in all, there’s not much to comment on, but what we wrote yesterday remains up-to-date – the USD Index is likely to correct and so is the precious metals sector.

Summing up, the odds for the corrective upswing in the precious metals sector have increased in the final part of last week and so has the size of the potential rally. While we had been suggesting staying out of the precious metals market with the long-term investment capital (long-term investments are usually the biggest part of one’s portfolio), it seems that the bounce in the market is now probable enough to push the risk/reward ratio in favor of having small speculative long positions (at the same time we don’t change our attitude toward long-term investments, as the medium-term trend is still down).

To summarize:

Trading capital (our opinion): Small (half of the regular position) long positions in gold, silver and mining stocks with the following stop-loss orders and (initial) target prices:

• Gold: Stop-loss: $1,222; Target price: $1,276
• Silver: Stop-loss: $18.33; Target price: $19.50
• GDX ETF: Stop-loss: $22.78; Target price: $25.30

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.

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.

Thank you.

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

Gold & Silver Trading Alerts
Forex Trading Alerts
Oil Investment Updates
Oil Trading Alerts