Gold & Silver Trading Alert: Pre-Hike Preparations

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Briefly: In our opinion, speculative short positions in gold, silver and mining stocks will be justified from the risk/reward perspective once the precious metals sector moves higher.

Today’s alert will be very short as generally nothing happened in the precious metals market yesterday. Gold moves back and forth mostly between $1,160 and $1,170, and we can say a similar thing about silver and mining stocks. Nothing changed yet as the markets appear to be waiting for the interest rate decision to move further. Consequently, there’s nothing that we can add to what we wrote yesterday. We described how (and why) we expect the situation to evolve and how we plan to take advantage of it (naturally, we can’t guarantee any outcome - we can only prepare for what seems likely at this time). The orders are already placed and are waiting for higher prices to be triggered. If you haven’t read yesterday’s alert so far, we encourage you to do so today.

Summing up, the short-term outlook remains rather unclear and the medium-term outlook remains bearish. It still seems that we could indeed see higher prices right before the interest rate announcement. We haven’t seen significant bearish confirmations so far this week, so we are not entering speculative short positions at the current prices, but we do think that placing orders with entry prices above the current ones is justified from the risk to reward point of view. If these orders are not filled, we will probably re-enter the speculative short positions relatively soon anyway.

Also, let’s keep in mind that the upcoming big decline in the precious metals sector is likely to create a great buying opportunity in case of the long-term investment capital - be sure to prepare yourself for it.

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

To summarize:

Trading capital (supplementary part of the portfolio; our opinion): Short positions (100% of the full position) in gold, silver and mining stocks will be justified from the risk/reward perspective (if gold, silver or mining stocks move to their entry price levels) with the following entry prices, stop-loss orders and initial target price levels:

Gold: entry price level: $1208; initial target price: $1,006; stop-loss: $1,272, entry price level for the DGLD ETN: $56.14 ; initial target price for the DGLD ETN: $88.88; stop-loss for the DGLD ETN $45.77
Silver: entry price level: $17.68; initial target price: $13.12; stop-loss: $19.13, entry price level for the DSLV ETN: $24.69 ; initial target price for the DSLV ETN: $46.18; stop-loss for the DSLV ETN $17.86
Mining stocks (price levels for the GDX ETF): entry price level $21.88; initial target price: $9.34; stop-loss: $26.12; entry price level for the DUST ETF: $45.33 ; initial target price for the DUST ETF: $143.56; stop-loss for the DUST ETF $25.90

Please note that we are adjusting the stop-loss levels for DUST and JDST ETFs.

In case one wants to bet on junior mining stocks' prices (we do not suggest doing so – we think senior mining stocks are more predictable in the case of short-term trades – if one wants to do it anyway, we provide the details), here are the stop-loss details and initial target prices:

GDXJ ETF: entry price level: $35.88; initial target price: $14.13; stop-loss: $44.12
JDST ETF: entry price level: $32.26 ; initial target price: $104.26; stop-loss: $16.90

If gold’s entry levels are hit, also silver’s and mining stocks’ positions will automatically be justified at this time (regardless of their respective prices at that time).

If silver’s entry levels are hit, also gold’s and mining stocks’ positions will automatically be justified at this time (regardless of their respective prices at that time).

If GDX’s entry levels are hit only mining stocks will be affected and other positions (in gold and silver) will NOT automatically be affected. In this case, waiting for gold’s or silver’s entry price levels will seem appropriate before opening short positions in metals.

We will send a confirmation e-mail, but if the session is very volatile, we may not be able to deliver it to you before the prices reverse, so it seems that entering the orders at this time is justified from the risk to reward point of view.

Long-term capital (core part of the portfolio; our opinion): No positions (in other words: cash)

Insurance capital (core part of the portfolio; 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 signs 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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