Enjoy the core part of today’s Gold Trading Alert without any changes. We’re sharing it with you as a thank-you for being with us.
Also, if you opened a position on Friday, you’re likely also very happy with the results – congratulations to you as well!
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Nov. 21, 2024
Briefly: in our opinion, no speculative positions in the precious metals sector 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.
In other words, we are taking profits off the table in today’s session. As it seems that miners will rally after the open, in my opinion, it would be a good idea to take profits off the table 30 minutes after the opening bell. Congratulations!
We’ll likely re-enter short positions in the GDXJ soon.
In three points:
- The corrective upswing in the precious metals sector might be over or it might end very soon.
- It’s possible that the USD Index will rally once again without an even bigger correction.
- Mining stocks are likely to move slightly higher and top there.
This might be it. The corrective rally might be over. This is a “might”. And what is certain? Except for the fact that there are no certainties on any market? The thing that seems certain right now is that the easy part of the rally is over (probably more than that).
Let’s get down to business – here’s the chart that made me take profits from the long position in GDX (or NUGT, if one used this leveraged instrument or a short position in DUST if one chose that option).
Gold touched its rising resistance line and then moved somewhat back down. That’s it – this is a clear resistance that’s visible from the medium-term point of view.
Additionally, gold moved slightly above its 50% Fibonacci retracement based on the recent decline and then moved back below this level.
Yesterday, I wrote that gold could rally all the way up to $2,700 and the 61.8% Fibonacci retracement, but I assumed that gold would reach this level later, and that it would correspond to the rising resistance line from the previous chart when it gets there.
Gold still might (!) move to $2,700, but given the rising medium-term resistance line, expecting this to happen seems to be a risky bet.
Silver didn’t reach its previous highs or the $32.5 level, but since gold moved to its own resistance, the top in silver might be in as well (or at hand). The next target for the white metal is below $27.50.
The GDX ETF rallied and so did the RSI indicator based on it.
The interesting analogy to the recent past is that most corrective upswings that started with RSI below 30 continued until the RSI moved to or close to 50.
GDX-based RSI is not yet at 50, but after it rallies some more today it will likely get there. Maybe not to 50 exactly but close enough to it for me to say that the easy part of the rally is over (and perhaps it will be completely over at this time).
In today’s pre-market trading, the GDX is trading at $38.03 (at the moment of writing these words). Can it rally to $38.48 within the first 30 minutes of the session? It’s certainly possible, but even if its rally is smaller, I still think the profits should be taken off the table. It’s usually not a good idea to get greedy close to the end of a given price move (it’s good to get greedy when everyone is fearful, though).
What’s next? We’ll likely re-open the short positions in the GDXJ soon – perhaps even later today. If it’s clear-ish (seems justified from the risk/reward point of view) today, I’ll send out an intraday Gold Trading Alert with details.
The short position in the FCX remains intact (by the way, FCX declined yesterday and since copper is down today, FCX might decline once again). I’ll most likely also feature a completely new position in the gold stock that I described yesterday.
Meanwhile, the USD Index didn’t reach its downside target area, but it’s possible that it wil rally from here nonetheless.
During the 2022 rally, some pauses were really small, so it’s possible that this tiny pause is all that we got here as well. Plus, the open interest (pink – magenta? - line) is at the level where we previously saw a similarly small pause in USD Index’s rally – in early April 2024.
Can the USD Index correct some more here? Yes. But it might continue to soar as well. This would not be reliable enough to open a trading position in the USD Index, but… we’re not trading the USD Index. We’re closing a long position as it’s no longer justified from the risk to reward point of view.
All in all, we’re taking profits off the table. Those are very quick profits as this trade lasted exactly one week. Please recall that I wrote that this rally in mining stocks might take few – ten trading days. We’re closing the trade on the fifth trading day after it was opened – perfectly on time.
Congratulations!
And as for the next trading position - I’ll keep my eyes open, and I’ll report to you – my subscribers – accordingly.
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Thank you.
Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief