Gold & Silver Trading Alert: Dollar’s Major Breakout and Gold's Simultaneous Rally #2

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Briefly: In our opinion no speculative positions are currently justified from the risk/reward perspective. Being on the long side of the precious metals market with half of the long-term investment capital seems justified from the risk/reward perspective.

Things did not become clearer yesterday after we published the alert nor did they in today's pre market trading, so what we wrote yesterday remains up-to-date. Today's move in gold (silver didn't really move) didn't make the situation clearer because it didn't take gold above the rising long-term support line (see yesterday's comments and the long-term gold chart for details) and we haven't seen a move higher in the USD Index yet.

Gold's strength looks encouraging, but the size of the move is similar to the previous corrective upswings (so it can simply be another one of those) and the USD Index is more and more likely to move much higher, which is likely to push gold lower once again. If gold refuses to decline once again - despite another major upswing in the USD, we will be able to conclude that the major decline in gold is most likely over - but at this time it still seems that the trend remains down.

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

To summarize:

Trading capital (our opinion): No positions

Long-term capital (our opinion): Half positions in gold, half positions in silver, half position in platinum and half position in mining stocks.

Insurance capital (our opinion): Full position

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 sings 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 always, we'll keep you - our subscribers - updated should our views on the market change. We will continue to send out Gold & Silver Trading Alerts on each trading day and we will send additional Alerts whenever appropriate.

The trading position presented above is the netted version of positions based on subjective signals (opinion) from your Editor, and the automated tools (SP Indicators and the upcoming self-similarity-based tool).

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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Hand-picked precious-metals-related links:

Germany Repatriated 120 Tonnes Of Gold In 2014

Most money pumped into gold ETFs since October 2012

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In other news:

IMF Lowers Global Growth Forecast by Most in Three Years

Is the era of 7% growth over for China?

Are Spain and Italy headed for 1% yields?

Bank of Japan: To bazooka or not

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Thank you.