Yesterday’s analysis generated quite a bit of interest, and I’m happy that it did, as a lot of research went into it.
I’ll start by quoting one of the letters that I received (thank you for all of them, I greatly value and appreciate them):
“Dear PR,
I was very impressed with the e-mail you sent today documenting the predictions of various experts in the 2011 gold price run-up and the aftermath once the top had been reached.
Despite taking a severe beating on silver that year, I have continued to pay attention to the precious metals sector over the years and am still interested in buying mining stocks or silver when the appropriate time comes.
I frequently glance through the headlines at Kitco.com and I have noticed over the past year that you are often the only analyst with a medium-term bearish view.
I have carefully studied your charts and reasoning over the course of the past year, first through the extended trial subscription you made available last summer, and then as a paying subscriber from late October onward. It seems to me that you've made a very compelling case for a large decline to come in GDXJ and FCX, and I expect to profit from it some time this year. (In fact, I did pretty well shorting these this fall and realized some profits at the turn of the year as you suggested. I'm now positioned short again waiting for things to play out and have bolstered my position size by buying some put options.)
Thank you for your work. It has been very insightful to read and observe your methodology, which is different than what I see elsewhere.”
I’m particularly grateful for this feedback, as I’m happy to see that everyone else seems to be on the same side of the boat. Those are usually the times when you want to be on the other side – and that’s where we are.
And yes, I do continue to think that GDXJ, FCX, and NEM offer excellent shorting opportunities right now, especially given how remarkably weak GDXJ was relative to GLD yesterday.
GLD moved to new highs, but GDXJ barely rallied. It’s still close to last week’s lows. As I said it multiple times before, weak miners relative to gold are one of the key confirmations that the top is in or at hand. The way GLD and GDXJ behave relative to their early-Feb. highs (green line helps to see that) is really telling and bearish.
On the following gold charts, we see that several triangle-vertex-based reversals translated into several highs.
My comment here is that what I wrote previously about those charts remains up-to-date:
Is it possible that we’ll get one last small move up before the slide?
Sure, it’s still possible. Nothing major is likely to happen, though. [Note: the move higher that we saw yesterday was bigger than I expected, but it still didn’t change anything.]
Even though it might not appear to be the case at the first sight, I’m generally trying to invalidate the cases that I’m making in my analyses to be more objective. Besides, if I won’t do it, someone else will, and I’ll get questions from my subscribers that I’ll want to reply to, anyway.
In the current case on the gold market, the question might be, if it was possible for gold to move up instead of declining. After digging deeper in the charts, it turns out that yes, this is possible, but it’s neither very likely, nor is the possible (I mean, probable as anything is possible on the markets) move higher likely to be significant.
Depending on how one draws the support and resistance lines (which exactly high will they use), we have a situation, where gold price is already after or right before its triangle-vertex-based turning points. It’s after three of them and one is still ahead – due tomorrow [on Wednesday].
From the 4-hour perspective, we get something similar.
The top is likely already in, but it’s also possible that we’ll see one final top shortly.
The miners’ weakness already tells us which way this is all likely to develop. And so does the recent silver spike.
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Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief