Gold Prices Decline While Miners Point Much Lower

Gold, silver, and mining stocks declined yesterday, and the initial slide in the latter was truly profound. And that’s not the end of it.

In fact, it seems quite likely that another huge move lower has just begun and that you managed to enter short positions right on the day of the reversal (visibly above $35). Yesterday’s decline means that your profits have already increased – congratulations!

We closed 11 trades profitably, and now this trade in the GDXJ is already profitable, too. Truly exciting times!

All right, what’s next? You already know the answer to this question (lower prices!), but still, let’s take a look at what happened in the junior miners yesterday.

Gold Prices Decline While Miners Point Much Lower - Image 1

They just closed over 1% lower, but the size of the intraday decline shows what kind of sharp moves lower are likely ahead. Why did the junior miners move back up? Most likely because the stock market corrected after declining significantly in the previous days – miners’ reaction is understandable in this context, and so is the stocks’ small rebound.

The trend remains clearly down.

One more very interesting thing also happened on the markets yesterday – the USD Index declined, and – what’s even more important – the dollar’s decline didn’t cause the precious metals sector to move higher.

Gold Prices Decline While Miners Point Much Lower - Image 2

This kind of decline in the USD Index is quite natural right now – it soared profoundly in the previous weeks, so the fact that it’s taking a breather is normal and healthy for the medium-term rally.

The fact that the precious metals sector ignored the USD Index’s decline is profound, as it confirms that the top in the former is most likely in. If the PMs were unable to stay steady, let alone rally despite declining USDX, it’s quite clear that they will slide in a big way once the USD Index shows strength. And it’s likely to show it, as the medium-term trend remains up.

So, it looks like much lower prices of gold, silver, and mining stocks are ahead and that the profits on this short position are going to increase soon.

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Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief