Gold Trading Alert No.2 from August 23, 2023

Well, that was quick.

The GDXJ just touched its binding profit-take level ($34.89), which means that we are closing the long position and we are taking profits off the table. This has been 10th profitable trade in a row. Congratulations!

Was that the top? I don’t know. But what I do know is that the easy part of the rally is over. It’s not easy psychologically to take profits while it’s still easy to do so, as it’s natural for everyone to want to “squeeze” as much of a given rally as possible. However, it’s true that the last few pennies are often the most costly. It means that while trying to catch the entire move one might miss the exit and the profits might evaporate completely.

Even if the GDXJ ETF is going to move higher here, it’s not likely to move far and the rally is not likely to be significant.

Consequently, I no longer thing that having a long position in the precious metals sector is justified at this time. If I had a long position in gold or silver, I would be exiting it now as well.

At the same time, I think that re-entering a big, short position in the GDXJ is justified from the risk to reward point of view. I’m using a large position size – 300% of the regular position size (just the position size, not the size of the entire account, of course!).

Naturally, this is just my opinion, and please be sure that you don’t use more capital than you’re comfortable with, and please be sure that the amount is low enough, for a move to $36.5 or so not to raise any concerns. It’s not that such a move is likely – it’s simply possible and it shouldn’t cause any concerns. If a vision of such a move would cause you to be stressed, it’s a good sign that the position that you plan to have is too big.

My target for this upcoming slide in the GDXJ ETF is at about $26, but I’ll provide more details on that in tomorrow’s regular analysis. I’ll also provide supplementary target levels.

Of course, if we get a good chance to exit or switch the position before GDXJ moves to $26 (like we did this week), I’ll keep you – my subscribers – informed.

Again, congratulations!

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

Thank you.

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