Gold & Silver Trading Alert: New Highs, No New Highs

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Briefly: In our opinion, no speculative positions in gold, silver and mining stocks are justified from the risk/reward point of view. We will likely have another trading opportunity shortly.

Gold, silver and mining stocks didn’t move above their previous highs in intra-day terms, but they all moved higher in terms of daily closing prices. What can we infer from these moves?

Let’s take a closer look at the charts (charts courtesy of http://stockcharts.com).

Short-term Gold price chart - Gold spot price

Short-term Silver price chart - SLV ETF - iShares Silver Trust

GDX - Market Vectors Gold Miners - Gold mining stocks

In short, there’s not much that we can say other than what we wrote in yesterday’s alert. Gold, silver and mining stocks moved just a little higher and it is rather inconsequential. The volume was lower than had been the case on Friday, but it was not very low – not low enough for the rally to be a bearish sign.

The short-term outlook was unclear based on mixed signals from multiple sources (if you haven’t read yesterday’s alert, we suggest that you do so now) and it remains to be the case today. It seems best to wait for a confirmation that the local top is in, before re-entering short positions. We have not seen such confirmations based on yesterday’s session. Consequently, the summary of yesterday’s alert remains up-to-date:

Summing up, quite a lot happened in metals, miners, other markets and ratios last week and the short-term outlook is now unclear as we have some signals that point to higher prices in the near term (like higher weekly closes in gold, silver and HUI) but at the same time we have a lot of bearish signs as well (reversal in miners on huge volume, sell signals from major and efficient indicators and no breakout above the previous highs in silver). Gold broke higher (in terms of both daily closing prices and in intra-day terms) and while it still appears to be topping, at this time we can’t rule out a sharp, temporary upswing to $1,328 or so. Consequently, we think that the risk to reward ratio does not favor any positions at this time. It seems that it’s justified to wait and re-enter the short position (or open a long one if we get much more bullish signs, but this doesn’t appear likely) in more favorable conditions (preferably at higher prices after seeing a major daily reversal).

As always, we will keep you – our subscribers – updated.

To summarize:

Trading capital (our opinion): No positions

Long-term capital (our opinion): No positions

Insurance capital (our opinion): Full position

Plus, you might want to read why our stop-loss orders are usually relatively far from the current price.

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.

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The day before yesterday, the Bank for International Settlements (BIS) released its quarterly review for March 2016. What can we learn from this publication?

BIS March Quarterly Report and Gold

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BlackRock Can Buy Gold Again: IAU Suspension Lifted After 300 Million New Shares Registered

Goldman Sachs Increases Barrick Gold Corp. (ABX) Price Target to C$20.00

South Africa’s gold industry, like its economy, is crumbling

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