Briefly: in our opinion, full (300% of the regular position size) speculative short positions in junior mining stocks are justified from the risk/reward point of view at the moment of publishing this Alert.

Some might consider an additional (short) position in the FCX.

While we’re normally not posting Gold Trading Alerts while there are U.S. market holidays (like today), but I thought that you’d appreciate tomorrow’s issue well ahead of tomorrow’s opening bell.

Truth be told, though, there’s not that much to write because what we saw on the market on Friday took place in exact tune with what I wrote previously.

Here’s what I wrote in Friday’s huge Gold Trading Alert about the recent gold price performance:

Gold just broke below its rising, medium-term support lines, so it would be quite natural to get back to this line, verify the breakout, and then decline once again. It seems that this is what is taking place in today’s pre-market trading.

Then again, given how far gold rallied ignoring the fundamental reality of higher real rates, it could fall much more before it corrects.

If we see a combination of meaningful bullish signals and it seems that going long is a good idea, as always, I’ll keep my Gold Trading Alert subscribers informed.

And here’s what happened:

Gold did exactly that. It moved back up and then down again. Let’s zoom in to see it more clearly.

The volume was low, and one can say that it was due to the long weekend, but it could be simply because the move higher was a pause and not a real rally.

While gold verified its breakdown, silver moved higher in a much more notable manner.

Gold ended the day 0.03% higher (so, it was practically flat), but silver moved higher by almost 2%, which tells you a lot about silver’s very short-term outperformance.

Gold futures are up in today’s trading, but it’s not necessarily believable since it’s the market holiday in the U.S. today, and without the U.S. trading, price moves are not trustworthy because the U.S. is such a large market.

Today’s upswing in gold futures might be just something to trigger stop-loss orders from those in short positions, taking them off the market right before a slide materializes. Let’s keep in mind that for a stop-loss order to be activated, the exchange where it was placed would need to be open.

The S&P 500 futures were up somewhat, and then they moved back down.

This is another attempt to move to new highs, and just like many previous attempts were invalidated, this one is likely to share the same fate.

The debt ceiling deal is done, just like I wrote previously. It was obvious that it will be reached, but some investors were still positively surprised, and the market rallied.

Interestingly, two headlines that I saw on Yahoo! Finance today were about the debt ceiling deal being done and that it is actually a bearish thing down the road due to the limited spending.

This might indeed be the tipping point for the stock market and for other markets, but not for the reason that is often listed. I’d say that it might be due to the main motivation behind many (all?) politicians’ actions: gaining political capital and avoiding blame.

If The Powers That Be know very well that stocks are going to have to slide eventually, then they would prefer to make sure that nobody in high places is “rightfully” blamed. And wouldn’t it be nice and convenient, if the stock market plunged right after a deal is done to avoid country’s default? Surely, the politicians did everything they could, right?

Anyway, some other articles on the same website pointed to how expensive everything currently is. In other words, inflation. And yes, it remains to be political, so those banking on lower interest rates soon, are in for some bearish surprises.

Let’s take a look at the hourly chart featuring the GDXJ (proxy for junior mining stocks).

The self-similar pattern continues, and if it is to continue some more, we’re likely to see some back-and-forth movement in the very near term and then another move lower.

Given gold futures’ move higher, it seems quite likely that junior miners could move a bit higher and then continue their decline.

The medium-term outlook for the precious metals sector (and for the FCX) remains to be extremely bearish, and the profit potential for short positions in junior miners and FCX remains enormous. While I can’t promise any kind of return (nobody can), in my opinion, the recent profitable position in the FCX will soon be joined by even more profits, and the winning streak of trades that started in early 2022 will continue.

On a technical note, this is the Gold Trading Alert that would normally be posted tomorrow, on May 30, 2023, but we are posting it one day ahead of schedule. So, if something major happens on the market tomorrow, I’ll send a quick, intraday Alert, but if not, there will be no regular Gold Trading Alert posted tomorrow.

Overview of the Upcoming Part of the Decline

1. It seems that the recent – and probably final – corrective upswing in the precious metals sector is over.
2. If we see a situation where miners slide in a meaningful and volatile way while silver doesn’t (it just declines moderately), I plan to – once again – switch from short positions in miners to short positions in silver. At this time, it’s too early to say at what price levels this could take place and if we get this kind of opportunity at all.
3. I plan to switch from the short positions in junior mining stocks or silver (whichever I’ll have at that moment) to long positions in junior mining stocks when gold / mining stocks move to their 2020 lows (approximately). While I’m probably not going to write about it at this stage yet, this is when some investors might consider getting back in with their long-term investing capital (or perhaps 1/3 or 1/2 thereof).
4. I plan to return to short positions in junior mining stocks after a rebound – and the rebound could take gold from about $1,450 to about $1,550, and it could take the GDXJ from about $20 to about $24. In other words, I’m currently planning to go long when GDXJ is close to $20 (which might take place when gold is close to $1,450), and I’m planning to exit this long position and re-enter the short position once we see a corrective rally to $24 in the GDXJ (which might take place when gold is close to $1,550).
5. I plan to exit all remaining short positions once gold shows substantial strength relative to the USD Index while the latter is still rallying. This may be the case with gold prices close to $1,400 and GDXJ close to $15 . This moment (when gold performs very strongly against the rallying USD and miners are strong relative to gold after its substantial decline) is likely to be the best entry point for long-term investments, in my view. This can also happen with gold close to $1,400, but at the moment it’s too early to say with certainty.
6. The above is based on the information available today, and it might change in the following days/weeks.

You will find my general overview of the outlook for gold on the chart below:

Please note that the above timing details are relatively broad and “for general overview only” – so that you know more or less what I think and how volatile I think the moves are likely to be – on an approximate basis. These time targets are not binding nor clear enough for me to think that they should be used for purchasing options, warrants, or similar instruments.

Letters to the Editor

Please post your questions in the comments feed below the articles, if they are about issues raised within the article (or in the recent issues). If they are about other, more universal matters, I encourage you to use the Ask the Community space (I’m also part of the community), so that more people can contribute to the reply and enjoy the answers. Of course, let’s keep the target-related discussions in the premium space (where you’re reading this).

Summary

To summarize, the medium-term outlook for the precious metals sector (and for the FCX) remains to be extremely bearish and the profit potential for short positions in junior miners and FCX remains enormous.

We took massive profits from our second FCX trade last week, and after a daily rebound and over 3% rally, we re-entered those short positions to capitalize on the next move lower in the company’s shares.

While I can’t promise any kind of return (nobody can), in my opinion, the recent profitable position in the FCX will soon be joined by even more profits, and the winning streak of trades that started in early 2022, will continue.

If I didn’t have a short position in junior mining stocks, I would be entering it now.

On a technical note, this is the Gold Trading Alert that would normally be posted tomorrow, on May 30, 2023, but we are posting it one day ahead of schedule. So, if something major happens on the market tomorrow, I’ll send a quick, intraday Alert, but if not, there will be no regular Gold Trading Alert posted tomorrow.

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

To summarize:

Trading capital (supplementary part of the portfolio; our opinion): Full speculative short positions (300% of the full position) in junior mining stocks are justified from the risk to reward point of view with the following binding exit profit-take price levels:

Mining stocks (price levels for the GDXJ ETF): binding profit-take exit price: $26.13; stop-loss: none.

Alternatively, if one seeks leverage, we’re providing the binding profit-take levels for the JDST (2x leveraged). The binding profit-take level for the JDST: $13.87; stop-loss for the JDST: none.

For-your-information targets (our opinion; we continue to think that mining stocks are the preferred way of taking advantage of the upcoming price move, but if for whatever reason one wants / has to use silver or gold for this trade, we are providing the details anyway.):

Silver futures downside profit-take exit price: $17.83 (stop-loss: none)

SLV profit-take exit price: $16.73 (stop-loss: none)

ZSL profit-take exit price: $32.97 (stop-loss: none)

Gold futures downside profit-take exit price: $1,743 (stop-loss: none)

HGD.TO – alternative (Canadian) 2x inverse leveraged gold stocks ETF – the upside profit-take exit price: $10.97 (stop-loss: none due to vague link in the short term with the U.S.-traded GDXJ)

HZD.TO – alternative (Canadian) 2x inverse leveraged silver ETF – the upside profit-take exit price: $25.47 (stop-loss: none)

///

Optional / additional trade idea that I think is justified from the risk to reward point of view:

Short position in the FCX with $27.13 as the short-term profit-take level.

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’ve 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 we describe the situation for the day that the alert is posted in the trading section. In other words, if 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 to decide whether keeping a position on a given day is in tune with your approach (some moves are too small for medium-term traders, and some might appear too big for day-traders).

Additionally, 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 (as 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: UGL, GLL, AGQ, ZSL, 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" (GLL for instance), but not for the "main instrument" (gold in this case), we will view positions in both gold and GLL as still open and the stop-loss for GLL would have to be moved lower. On the other hand, if gold moves to a stop-loss level but GLL doesn't, then we will view both positions (in gold and GLL) 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 daily 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. Furthermore, 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.

===

On a side note, while commenting on analyses, please keep the Pillars of the Community in mind. It’s great to provide points that help others be more objective. However, it’s important to focus on the facts and discuss them in a dignified manner. There is not much of the latter in personal attacks. As more and more people join our community, it is important to keep it friendly. Being yourself, even to the point of swearing, is great, but the point is not to belittle other people or put them in a position of “shame” (whether it works or not). Everyone can make mistakes, and everyone does, in fact, make mistakes. We all here have the same goal: to have a greater understanding of the markets and pick better risk-to-reward situations for our trades. We are on the same side.

On another – and final – side note, the number of messages, comments etc. that I’m receiving is enormous, and while I’m grateful for such engagement and feedback, I’m also starting to realize that there’s no way in which I’m going to be able to provide replies to everyone that I would like to, while keeping any sort of work-life balance and sanity ;) Not to mention peace of mind and calmness required to approach the markets with maximum objectivity and to provide you with the service of the highest quality – and best of my abilities.

Consequently, please keep in mind that I will not be able to react / reply to all messages. It will be my priority to reply to messages/comments that adhere to the Pillars of the Community (I wrote them, by the way) and are based on kindness, compassion and on helping others grow themselves and their capital in the most objective manner possible (and to messages that are supportive in general). I noticed that whatever one puts their attention to – grows, and that’s what I think all communities need more of.

Sometimes, Golden Meadow’s support team forwards me a message from someone, who assumed that I might not be able to see a message on Golden Meadow, but that I would notice it in my e-mail account. However, since it’s the point here to create a supportive community, I will specifically not be providing any replies over email, and I will be providing them over here (to the extent time permits). Everyone’s best option is to communicate here, on Golden Meadow, ideally not in private messages (there are exceptions, of course!) but in specific spaces or below articles, because even if I’m not able to reply, the odds are that there will be someone else with insights on a given matter that might provide helpful details. And since we are all on the same side (aiming to grow ourselves and our capital), a to of value can be created through this kind of collaboration :).

Thank you.

Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief