Gold & Silver Trading Alert: Gold Refuses to Rally Despite Turmoil in Europe

tools spotlight

Briefly: In our opinion, a speculative short position (full) in gold, silver and mining stocks is justified from the risk/reward point of view.

Today’s alert is going to be very short, as we have basically nothing to comment on as nothing changed during yesterday’s session. Gold and silver continue to move back and forth and miners continue to underperform. Yesterday was another day when we saw the above type of action. The profits on the short positions in mining stocks increased once again and the breakdowns in the case of the HUI Index and GDX ETF are even more than confirmed at this time. The implications and outlook remain bearish.

If you haven’t read yesterday’s trading alert and the previous several issues, we suggest that you do so today – the points that we made remain up-to-date also today.

Since little changed based on yesterday’s session, we can summarize today’s alert just like summarized the yesterday’s one:

Summing up, more and more signs seem to confirm our outlook for the precious metals sector – it seems that the final bottom is still ahead of us. The current short positions in the precious metals sector are already profitable but it’s likely that they will become much more profitable in the future, so we are keeping them intact.

We realize that the situation in the precious metals market is rather boring, but it doesn’t make the profit potential any smaller. Given the Greece-related turmoil, the boring action (i.e. no rally) is actually bearish since one would expect gold to rally given the increased political tensions in Europe.

We will keep you – our subscribers – updated.

To summarize:

Trading capital (our opinion): Short (full position) position in gold, silver and mining stocks is justified from the risk/reward perspective with the following stop-loss orders and initial (!) target prices:

Gold: initial target price: $1,115; stop-loss: $1,253, initial target price for the DGLD ETN: $87.00; stop loss for the DGLD ETN $63.78
Silver: initial target price: $15.10; stop-loss: $18.13, initial target price for the DSLV ETN: $67.81; stop loss for DSLV ETN $38.44
Mining stocks (price levels for the GDX ETN): initial target price: $16.63; stop-loss: $21.83, initial target price for the DUST ETN: $23.59; stop loss for the DUST ETN $10.37

In case one wants to bet on lower junior mining stocks' prices, here are the stop-loss details and initial target prices:

GDXJ: initial target price: $21.17; stop-loss: $28.68
JDST: initial target price: $14.35; stop-loss: $5.65

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.

Since it is impossible to synchronize target prices and stop-loss levels for all the ETFs and ETNs with the main markets that we provide these levels for (gold, silver and mining stocks – the GDX ETF), the stop-loss levels and target prices for other ETNs and ETF (among other: UGLD, DGLD, USLV, DSLV, NUGT, DUST, JNUG, JDST) are provided as supplementary, and not as “final”. This means that if a stop-loss or a target level is reached for any of the “additional instruments” (DGLD for instance), but not for the “main instrument” (gold in this case), we will view positions in both gold and DGLD as still open and the stop-loss for DGLD would have to be moved lower. On the other hand, if gold moves to a stop-loss level but DGLD doesn’t, then we will view both positions (in gold and DGLD) as closed. In other words, since it’s not possible to be 100% certain that each related instrument moves to a given level when the underlying instrument does, we can’t provide levels that would be binding. The levels that we do provide are our best estimate of the levels that will correspond to the levels in the underlying assets, but it will be the underlying assets that one will need to focus on regarding the sings pointing to closing a given position or keeping it open. We might adjust the levels in the “additional instruments” without adjusting the levels in the “main instruments”, which will simply mean that we have improved our estimation of these levels, not that we changed our outlook on the markets. We are already working on a tool that would update these levels on a daily basis for the most popular ETFs, ETNs and individual mining stocks.

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 Tools and Indicators.

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.

=====

Latest Free Trading Alerts:

The U.S. factory sector declined 0.2 percent in May, falling into a technical recession. What does it mean for the U.S. economy and the gold market?

Gold News Monitor: U.S. Industry in Technical Recession

Earlier today, EUR/USD reversed and declined under 1.1300 once again as ongoing worries over Greece’s future in the euro zone (after talks between Greece and its international creditors ended without an agreement) weighed on investors’ sentiment. Will we see the common currency below 1.1200 in the coming days?

Forex Trading Alert: EUR/USD – Another Climb to Key Resistance Zone

=====

Hand-picked precious-metals-related links:

Monsoon concerns weigh on Indian gold demand, prices at discount

=====

In other news:

Wall Street bets on 75% chance of Greek default

Greek central bank warns of 'Grexit'

El-Erian: Major chance of a Greek 'accident' happening

Euro zone return to inflation confirmed as energy impact wanes

The China Bubble Is Going to Burst

=====