Miners Erase 2 Daily Rallies in 1 Day

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Briefly: In our opinion, full (150% of the regular full position) speculative short positions in gold, silver and mining stocks are justified from the risk/reward perspective at the moment of publishing this alert.

Unlike yesterday’s issue, today’s alert is going to be rather short because the situation in the markets either developed in tune with our expectations or didn’t change at all. Let’s take a look at the charts (chart courtesy of http://stockcharts.com).

Short-term Gold price chart - Gold spot price

In yesterday’s alert, we wrote the following:

Gold closed yesterday’s session above the May low and at the same time it closed below the rising red resistance line and 2 declining resistance lines – the sharpest one being based on the June highs in terms of daily closing prices. On one hand, the comeback above the May low is bullish, but on the other hand, since gold tried to move above the declining resistance line based on the closing prices and finally closed below it, the implications of yesterday’s session are also bearish. All in all, it doesn’t seem that we saw meaningful changes yesterday.

Yesterday, gold once again closed below the declining resistance line, so nothing really changed.

Short-term Silver price chart - Silver spot price

Silver moved lower, more than erasing Wednesday’s upswing and closing once again below the December 2016 low. It seems that Wednesday’s close back above it was accidental. The outlook remains bearish.

GDX - Market Vectors Gold Miners - Gold mining stocks

Miners declined (underperforming gold once again, just like the HUI to gold ratio suggested) and erased 2 previous daily gains. On July 10, the closing price was $21.51, while yesterday’s close was $21.50. The outlook remains bearish.

Short-term US Dollar price chart - USD

In yesterday’s alert, we wrote the following about the USD Index:

Speaking of turnarounds, we fine-tuned the cyclical turning points in the USD Index (the nearby turning point was not really affected, though).

The most recent move in the USD Index was down, so the turning point has bullish implications for the US currency, which, in turn, is bearish for the precious metals sector.

The turning point is today, so we are likely to see a turnaround shortly, quite likely today.

Summing up, the situation on the precious metals market became a bit more bearish based on yesterday’s price changes, but since it was already very bearish for the following weeks and months, little changed overall. Any strength here is likely to be just temporary and it seems that the profits from our short positions will greatly increase in the following weeks.

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

To summarize:

Trading capital (supplementary part of the portfolio; our opinion): Short positions (150% of the full position) in gold, silver and mining stocks are justified from the risk/reward perspective with the following stop-loss orders and initial target price levels / profit-take orders:

Gold: exit-profit-take level: $1,063; stop-loss: $1,317; initial target price for the DGLD ETN: $81.88; stop-loss for the DGLD ETN $44.57
Silver: initial target price: $13.12; stop-loss: $19.22; initial target price for the DSLV ETN: $46.18; stop-loss for the DSLV ETN $17.93
Mining stocks (price levels for the GDX ETF): initial target price: $9.34; stop-loss: $26.34; initial target price for the DUST ETF: $143.56; stop-loss for the DUST ETF $21.37

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: initial target price: $14.13; stop-loss: $45.31
JDST ETF: initial target price: $417.04; stop-loss: $43.12

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

Important Details for New Subscribers

Whether you already subscribed or not, we encourage you to find out how to make the most of our alerts and read our replies to the most common alert-and-gold-trading-related-questions.

Please note that the in the trading section we describe the situation for the day that the alert is posted. In other words, it we are writing about a speculative position, it means that it is up-to-date on the day it was posted. We are also featuring the initial target prices, so that you can decide whether keeping a position on a given day is something that is in tune with your approach (some moves are too small for medium-term traders and some might appear too big for day-traders).

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 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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