Gold Miners - Time to Short?
Updated
This was posted on my blog at gdxdaily.com last night, be sure to follow it to get notified first of any new trade ideas! The ideas will also be explained more in detail on the blog.
Trade summary:
Given recent macro updates I believe the short to medium term outlook for gold miners is starting to look bearish, this is due to multiple factors that will likely boost the broad equity market sentiment. Below are some of the reasons:
1.) Fed committing to their stance that rates are good where they are, and most likely won’t change it for the rest of the year. This gives investors one less thing to worry about since the rates are accommodative right now. With the possibility of rate cuts lower and rate increases back on the table, investors will be less attracted to gold.
2.) The slew of US economic data coming out so far points to a still healthy economy with good job growth. China is also actively injecting their economy with growth as well, so we may get positive economic surprises from their data as well, which will boost market sentiment and drive down gold prices.
3.) The fact that the US and China have a plan to resolve the enforcement issue for the trade deal (which was one of the biggest roadblocks) is a promising sign, we could be getting more positive trade news which will ease investor fears and drive more money flowing from safe assets to riskier ones.
4.) Corporate earnings will be the next big wave of data driving the market. We’ve had many downgrades on earnings projection so far in the last couple of months, therefore the expectations are already low. There’s a high chance for some positive earnings surprises, easing investor fears and more capital will start flowing into the equity markets. Once again, a negative scenario for gold prices.
I’ve started to add to my
DUST position, with currently 10% of a full position at an average cost price of $17.5, and will be looking to add more as it retraces. The entry points in the chart are general points where I think it might retrace to, but it may change as I see what the price action looks like. Be sure to check the updates to this post and my blog to see my daily update on any entries I take.
Trade summary:
Given recent macro updates I believe the short to medium term outlook for gold miners is starting to look bearish, this is due to multiple factors that will likely boost the broad equity market sentiment. Below are some of the reasons:
1.) Fed committing to their stance that rates are good where they are, and most likely won’t change it for the rest of the year. This gives investors one less thing to worry about since the rates are accommodative right now. With the possibility of rate cuts lower and rate increases back on the table, investors will be less attracted to gold.
2.) The slew of US economic data coming out so far points to a still healthy economy with good job growth. China is also actively injecting their economy with growth as well, so we may get positive economic surprises from their data as well, which will boost market sentiment and drive down gold prices.
3.) The fact that the US and China have a plan to resolve the enforcement issue for the trade deal (which was one of the biggest roadblocks) is a promising sign, we could be getting more positive trade news which will ease investor fears and drive more money flowing from safe assets to riskier ones.
4.) Corporate earnings will be the next big wave of data driving the market. We’ve had many downgrades on earnings projection so far in the last couple of months, therefore the expectations are already low. There’s a high chance for some positive earnings surprises, easing investor fears and more capital will start flowing into the equity markets. Once again, a negative scenario for gold prices.
I’ve started to add to my
DUST position, with currently 10% of a full position at an average cost price of $17.5, and will be looking to add more as it retraces. The entry points in the chart are general points where I think it might retrace to, but it may change as I see what the price action looks like. Be sure to check the updates to this post and my blog to see my daily update on any entries I take. Trade active
Current position: Still only 10% of full position in DUST. Which is unfortunate given today's 6+% increase in DUST.GDX sold off more than expected today due to a rising dollar and plummeting gold prices. On one hand it adds confirmation of our bearish thesis, however because I was expecting a retracement from the gap down, I wasn't able to get my orders filled.
I decided not to "chase" the gains and held off on increasing my position until a better risk/reward entry point opens up. See below for my new potential entries.
Trade active
Looks like GDX is bouncing back slightly today, look for good points to make first wave of entries.Trade active
Added 30% of full position to DUST, avg cost price is now $18.1.Trade active
Trade active
Bought another 10% position in DUST at $18.94. Current position is now 50% of full position at average cost price of $18.37.Trade active
Trade active
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