Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Our summary of the current situation in the precious metals is not going to differ much from what we wrote yesterday, and the reason is simple. The decline in gold, silver, and miners is developing just as we’ve been expecting it to. Most importantly, gold has just confirmed its breakdown and everything that we reported on gold’s outlook and price targets just got a huge confirmation.
Let’s take a look at what gold, silver, and mining stocks did in the last couple of days.
Gold broke below the lowest closing price of September and it just verified this breakdown by closing below it for three consecutive trading days, and that includes the weekly close too. That’s a clear way for gold to say that a relatively broad top has been formed and that lower prices are going to follow.
Silver broke not only below its September low, but also below its rising red support line and the 50% Fibonacci retracement level. Technically, silver’s breakdown was even more important than the one in gold. The fact that the white metal managed to close the week below the combination of three support levels is bearish, but it will become much more so only after it’s verified.
That’s one way to do it, and if anyone wants to take this route – sure, it’s their capital. We think that having a position open right now is better from the risk to reward point of view because of the confirmed breakdown in gold, and because of multiple signs that we have covered in our previous analyses, and that we can’t discuss on each day – there’s simply not enough space and time to again go through all the bearish factors that remain in place right now.
It is usually the case that three consecutive closes below a certain level are necessary for the market to verify the breakdown, but given how strongly correlated gold and silver are, the odds are that a slide in gold will trigger a powerful slide in silver as well. And gold’s plunge could start any day, hour, or minute.
That’s true, but it’s also true that they did the very same thing just several days ago, during the previous pause. On November 5th and 6th, miners moved higher on an intraday basis even though gold rallied only once in intraday terms. Moreover, November 5th – the first of the small, two-day, corrective upswing – was the day when the HUI opened lower but then moved up during the day. That’s exactly what happened on Friday – the first day of the current, two-day, corrective upswing.
Given the above similarity and the very bearish follow-up that we saw on November 7th (big plunge across the precious metals’ board), it’s hard to view miners’ performance as bullish. Besides, if the miners are really showing strength here and the decline in gold and silver continues today, then the former will easily repeat their supposedly bullish signal, indicating a local bottom. At this time, such a scenario seems doubtful.
The gold market has been declining just as we expected it to and it’s likely to decline some more before we see a bigger turnaround. Knowing when to exit a short position and when to enter a long one is the essential part of making money on this move. They say that the universe does not reward one for what they know, but for what they do with it. The clear price targets and profit-take details for gold, silver, and miners included in the full version of today’s analysis – our Gold & Silver Trading Alert – are the actionable part that savvy traders really should take into account right now.
(By Przemyslaw Radomski)
All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
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