Precious Metals ETF Trading: It’s been a week since
my last gold & silver report which I took a lot of heat because of
my bearish outlook. Friday’s closing price has this sector trading
precariously close to a major sell off if it’s not already started.
On a percentage bases I feel precious metals mining stocks as whole
will be selling at a sharp discount in another week or three. ETF funds
like the GDX, GDXJ and SIL have the most downside potential. The amount
of emails I received from followers of those who have been buying more
precious metals and gold stocks as price continues to fall was mind
blowing.
If precious metals continue to fall on Monday and Tuesday of this
week selling volume should spike as protective stops will be getting run
and the individuals who are underwater with a large percentage of their
portfolio in the precious metals sector could start getting margin
calls and cause another washout, spike low similar to what we saw in
2008.
ETF Trading Charts:
Below are updated with Friday’s closing prices showing technical breakdowns across the board..
Sweet & Sour ETF Trading Analysis:
Just to make things a little more interesting I would like to point out a couple other types of analysis.
Sweet:
Through analysis of the CEF Central Fund of Canada Ltd. chart and
evaluation it is clear precious metals are falling out of favor at an
increased rate. This fund owns physical gold and silver bullion and
investors are fleeing the fund so fast that it is now
trading at a 7% discount of its asset value. While this may not seem good for metals I see it as a positive.
When everyone is running for one door after an extended moves has
already taken place it tends to act as a contrarian indicator. Knowing
that some of the largest percent moves in a trend takes place before
reversing, I see this information as an early warning that a bottom will
soon be put in place.
Sour: While the USD index has not been much help compared to
2012, I feel as though a rising dollar is likely to unfold for a couple
weeks which may lend a hand to pulling the precious metals sector down.
Precious Metals ETF Trading Conclusion:
While I am starting to get bullish for a long term investment in
precious metals I know that a bottom has likely not yet been made. But
even if it has been, it is better to buy during a basing pattern or
breakout to the upside from a basing pattern than to be underwater with a
position for an extended period of time along with all the other
negatives that come along with it.
I do like the idea of CEF as a long term investment when I feel the
time is right. I have invested and traded it many times in the past. The
key to trading the fund is to be sure you are buying it at fair value
or a discount from the net asset value. You do not want to be buying it
when it is trading at a 5-7% premium. The fund owns both gold and silver
making it a simple diversified precious metals play.
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Sweet:
Through analysis of the CEF Central Fund of Canada Ltd. chart and
evaluation it is clear precious metals are falling out of favor at an
increased rate. This fund owns physical gold and silver bullion and
investors are fleeing the fund so fast that it is now trading at a 7% discount of its asset value. While this may not seem good for metals I see it as a positive.
