When one looks at gold and silver prices and their moves yesterday, it might seem that nothing happened in the precious metals market.
That’s far from the truth because the real action took place in mining stocks. Several weeks ago, it was miners’ strength that heralded the rally in the whole sector. Will we see one also this time? Let’s start with mining stocks (charts courtesy of http://stockcharts.com).
Miners moved higher and the volume that accompanied this move was rather average. It was not high enough to confirm the direction of the move by itself, but it was not low enough for us to say that the move was fake.
The fact that miners rallied without a rally in gold or a decline of the dollar is bullish for the short term. Consequently, we plotted an additional resistance line on the chart, in case GDX moves above its July high. The next resistance is close to the $28.50 level, at the September 2013 high.
There is little to comment on for gold as far as closing prices are concerned – there was a tiny – 0.08% - move higher, practically nonexistent. The interesting phenomenon was the intra-day decline right before the markets closed in the U.S. It caused the entire day to become a daily reversal – similar to the one that we saw on Friday. These reversals are bearish signs for the short term that contradict the bullish signal from mining stocks.
Consequently, even though the situation for mining stocks improved, it overall remains unclear and, in our opinion, it is still too risky to open a speculative position here. We realize that markets and our take on this situation might seem boring, but ultimately we are not investors and traders for the excitement, but for the growth of our portfolios, and it seems to us that at this time the risk that we would expose ourselves to by opening a position outweighs the potential profits that we could make.