Briefly: in our opinion, no speculative positions in gold, silver, or mining stocks are justified from the risk/reward point of view at the moment of publishing this Alert.

Some things that we outlined previously, happened yesterday or in today's pre-market session (gold moved to $1,630, and gold miners moved to their January high) and some things didn't take place (silver didn't move to its January high) - at least not yet. So, is the top in the PM sector in?

It might be already in as far as mining stocks are concerned, but it's unlikely to be in as far as silver is concerned. And in case of gold it's relatively unclear, but closer to being in than most people think.

USDX Status

First of all, the USD Index doesn't seem to have topped or corrected yet, but since it moved very close to 100 level (just 0.18 below it), it might have already topped. Whether this is the case or not (and it's not clear), it is clear that the USD Index has not yet bottomed. This means that the force that could push the PMs higher in the short run remains intact.

PMs Yesterday

Miners should be lagging gold before the top and silver should be outperforming gold. Miners have definitely underperformed gold yesterday by reversing despite a higher close in gold. Their reversal is also a topping sign on its own.

However, we should also see silver outperform gold at the very end of the move up and that didn't happen yesterday. Consequently, it seems that we will get another move higher - perhaps later today or early next week - when PMs would move higher and during this move silver would rise with more verve.

It would be a great bearish confirmation if miners showed weakness during the above-mentioned move higher - perhaps by once again testing the previous high, and once again failing to break above it on a closing-price basis.

Summary

Summing up, it seems that the precious metals market is about to form a major top soon, and the easier part of this rally is already over. Gold and miners have already moved to their upside targets but silver didn't ($19), and the pullback in the USD Index is definitely not yet over (it's not even clear if it has already begun). It seems that the PMs will move higher once again in the very near term (hours, perhaps days), but that the top is at hand.

We are preparing to enter short positions in gold, silver, and mining stocks. We will let you know manually once we want to proceed.

As always, we'll keep you - our subscribers - informed.

To summarize:

Trading capital (supplementary part of the portfolio; our opinion): No positions in gold, silver, and mining stocks are justified from the risk/reward perspective.

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

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.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager