Gold’s long-term trend remains intact with a $300 rally over the past 7 months. We went long Gold on 1 February 2016 and the physical price has increased by 22% since. GDXJ (Junior Miners) has surged 158% since the 3 February. A convincing break above $1350 on strong volume will provide the platform for a run at $1400 and eventually $1550 which was support for several years before the 2013 price reversal. $1300 is now strong support and the 50-day moving average is found at $1317. On this current rally, every dip to the 50 MA is a buying opportunity. Price and volume readings indicate institutional participation in gold, silver and mining stocks.
The physical silver spot price has surged 41% since early February and the Silver mining ETF SIL having spiked 161% in the same period. Note $20 & $22 levels as the first lines of resistance with $26 being the long term huge resistance point has served as support for several years before the 2013 sell-off. $18.50 is now the key support level, having served as recent resistance. $19.50 is short-term support.
The mining ETF we like, GDX, has closed for a 5th week in succession above the previous resistance level of $27.50. There appears to be little resistance between $30-$40. Mining stocks have been a great story throughout 2016 having suffered over the past few years. They remain historically undervalued relative to the price of the metal itself.
The latest Commitment of Traders Report (COT) reveals that commercial banks are now net short 32.4 million ounces of gold (an increase of 1.5 million ounces). Banks are therefore betting on lower gold prices and a price reversal could be on the cards. In silver, the Commercial net short position increased just shy of 10 million ounces and currently stands at an all-time record high of 545.6 million ounces of paper silver.
We believe the intermediate and long-term uptrends in the metals remain intact. We anticipate the dips to be bought especially at the 50 MA region. In the short-term, the big concern for the metals is the record short position being held by the largest banks could spring a temporary price reversal.