Briefly: In our opinion short speculative positions (half) in silver and mining stocks are justified from the risk/reward perspective. We are closing half of the long-term investment position in gold.
As you know, we had been expecting the tensions in Ukraine to cause a significant rally in gold (not necessarily in the rest of the precious metals sector). Not only wasn’t that the case on Monday – the rally indeed took place, but it was rather average, but gold managed to decline on Tuesday while there was no visible improvement in the situation in Ukraine and on the Crimea peninsula.
Gold is not performing as strongly as it should. That is a major bearish factor. Let’s examine the situation more closely (charts courtesy of http://stockcharts.com.)
The move above the 61.8% Fibonacci retracement level was invalidated yesterday. The move lower took place on low volume, which doesn’t confirm the rally. However, that’s not the most important thing to focus on – gold’s performance in light of the most recent events is. As mentioned earlier, it didn’t rally. In fact it’s more or less where it was a week ago. The implications are bearish.