Briefly: In our opinion small (half) speculative short positions in gold, silver and mining stocks are now justified from the risk/reward perspective.
During yesterday’s session nothing really changed. Gold, silver and mining stocks closed where they had closed on Monday. However, the volume that accompanied the intra-day moves was rather significant. Is it important? Let’s take a closer look (charts courtesy of http://stockcharts.com).
Since not much changed from the short-term perspective, it’s no wonder that nothing changed from the long-term perspective. What we wrote previously remains up-to-date:
On the long-term chart we see that even though gold moved higher – slightly above the rising resistance line – it remained below the declining red (dashed) resistance line. From this perspective, not much changed yesterday. We still think that the medium-term trend remains down.
Gold moved up and down on an intra-day basis without any meaningful move to end the session. Since there was no change in terms of price, the fact that the volume was high doesn’t change much. The short-term outlook remains unclear based on the gold chart along. It is the long-term chart of gold and the situation in the USD Index that make it worth trading.
The volume in mining stocks was rather significant when one compares it to what had happened during the previous 2 trading days. However, if one compares it to the previous significant daily upswings, we get rather poor volume. What are the implications? None, actually. We've seen a consolidation pattern for more than 2 weeks now, so basically, the way the mining stocks break out or down will mark the beginning of the next big move. It seems to us that the next big move will be down and it’s based i.a. on the situation in the USD Index.
The outlook for the USD Index remains bullish for the coming weeks and months, and this makes the picture bearish for gold, silver, and mining stocks. Naturally, we could see the precious metals sector rally even though the USD Index rallies as it has just touched its rising medium-term support line, but it doesn’t seem likely. The big moves in the USD Index and the precious metals sector still point in opposite directions.
Summing up, the situation in the precious metals market remains bearish.
To summarize:
Trading capital (our opinion): Short (half) position in gold, silver and mining stocks with the following stop-loss levels:
- Gold: $1,343
- Silver: $21.63
- GDX ETF: $27.30
Long-term capital: No positions
Insurance capital: 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 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
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