In our opinion no speculative positions in gold, silver and mining stocks are justified from the risk/reward perspective.
The precious metals market moved higher yesterday, which was in tune with what we've been expecting. The key question is if gold, silver and mining stocks have completed their rally or are they still likely to move higher before turning south again.
Before jumping into charts, we would like to point out that the reasons for which we think the medium-term move is down were covered in the previous Monday’s alert, and if you haven’t had the chance to read it, we encourage you to do so today. Having said that, let’s move to charts (charts courtesy of http://stockcharts.com.)
Gold moved higher, but hasn't reached the levels that we thought were likely to stop the rally.
Quoting our previous alert:
How high will gold rally before turning south again? There are no sure bets, but our best guess is that it will correct to the previously broken 61.8% or 50% Fibonacci retracement levels – which means a move to (or very close to) $122 or $124.50 or so in case of the GLD ETF and $1,260 or $1,290 in case of spot gold. We will be looking for bearish confirmations (signals from indicators, ratios, other markets, etc.) around these levels and we’ll probably re-enter short positions once we see them.
We saw the GLD ETF close at $121.39, so it's still below the lowest of the above-mentioned resistance levels and thus it seems that the rally will continue for at least a while.