Gold and silver have been the talk of the town amongst most professional investors in recent months. With the Fed printing the dollar into oblivion, gold caught a decent bid and became massively overbought, along with its cheaper brother silver.
Gold and silver sentiment became extreme and as you know, when the hysteria hits the market, it’s normally the end of the bull run. We have now had a decent retracement and believe that we can start looking at gold shares again for a bounce.
These are trades and not longer-term investments. There still is quite a good chance that gold unwinds lower, either before the U.S. election or possibly after it. There is a lot of risk in the U.S. election and with all the violence there could be some sort of mini civil war there, and gold is a good hedge against accusations of rigged elections and violence.
Below is the gold chart, clearly coming back to test the support from the mid-march rally. It’s also trading above the 50 day moving average.
The silver price below has clearly not pulled back nearly as much as gold and is still far from the 50 day moving average (the red line). We have some sort of pennant forming in silver.
South African gold miners listed in the U.S.
We can’t do a gold piece without starting with the South African miners listed in the US.
Anglogold below, has dropped 28% and is now building a small consolidation between 27.50 and 29.00, a break above 29 would trigger a buy. Warning Anglogold is trading below its 50 day moving average.
Not much to see on this chart to be honest.
Harmony has unwound its recent overbought condition and is trading above a level ($5.75) that has been tested 7 times. This one is going into the JSE Top 40 in 3 weeks’ time and into the MSCI emerging markets index at month-end. So, some forced buying might keep this one bid. Harmony has also retraced closer to the 50 day moving average. Below $5.65 all bets are off.
Sibanye results are due tomorrow and with such a messy range I prefer to look for better charts.
So to sum up the South African Stocks listed in the U.S. AngloGold has the best trading chart (that doesn’t mean it is the best buy longer-term). Harmony can be played on forced buying by index trackers, the other charts are very choppy and have no tradable patterns.
U.S. Gold and silver miners
First Majestic Silver (AG)
First Majestic Silver (AG) is a pure silver miner play. A hammer that has closed above the 50 day moving average provides a clear risk-reward. A close below $11 and the trade is over.
GDX, the gold miners ETF, is trading above support at $39 and has had a nice reversal candle off that zone. What I like here is that a break below there is a clear risk-off, as it also breaks the 50 day moving average.
Yamana Gold (AUY)
Yamana Gold (AUY) back to a support zone and the 50 day moving average. The same candlestick is appearing in a lot of precious metals miners (a hammer candlestick on the 50 day or above support).
Endeavour Silver Corp. (EXK)
EXK, a junior silver miner forming some sort of a wedge.
So, that’s a nice list of US-based Gold and Silver equities.
One of the things to keep in mind is that the USD is setting up for a possible bounce. Smart money is positioned long in the USD which is quite rare, and together with the Fed Chairman speaking at Jackson Hole on Thursday, one needs to keep a tight stop.
Always remember that gold shares have made more people drive Fiat Unos than they have made drive Ferraris.
If you don’t have a U.S. account, click below for more details.
The average cost of a US trade is 2 USD, roughly 35 Rand all in. Cost of a Cappuccino. That’s why we keep pushing for clients to consider the USA.
*Please note that these trade ideas form part of a larger weekly plan and the value of financial products can increase as well as decrease over time, depending on the value of the underlying securities and market conditions. The risk of loss arising from trading in Contracts for Difference can be substantial. You should carefully consider whether such investments are suitable for you in the light of your circumstances and financial resources.