From the Desk of Ian Culley @IanCulley
One of my favorite scenes from “Forgetting Sarah Marshall” is when we get to meet the in-house surf instructor, played by Paul Rudd.
Rudd’s character, Chuck, a transplant local, imparts sage advice, “When life gives you lemons, just say f@&k the lemons and bail!”
I always laugh at that one, even as I write this note.
That’s probably because I’ve spent the better part of the past twenty years chasing waves – but I don’t share this Hollywood version of a stoner-surfer ethos regarding life.
But I do follow this mindset when it comes to markets…
Rising real yields and a pesky US dollar are making lemons of the precious metals space.
A weakening dollar and falling interest rates lined up to vault gold toward new all-time highs.
Instead of kick-starting a precious metals rally, both potential catalysts are heading in the opposite direction (higher) – and the focus with it.
I’m not monitoring these shiny rocks for breakouts. I’m tracking fresh breakdowns.
The June pivot lows mark a critical level of interest as the precious metal space braces for a downside rout.
The 1,900 level coincides with my line in the sand for gold futures.
A break below those former lows increases downside risks.
If gold futures slip below the June pivot lows – bail!
No one has to feel bad about ditching gold. Better opportunities lie just around the corner.
The corresponding level for silver futures stands at 22.14.
A break below that level in silver would also involve a trendline violation, signaling a potential near-term trend reversal.
If silver slides below that key level – bail!
Remember, it’s only a trade. Holding a position in silver does not define who we are.
It’s no different for the Gold Miners ETF $GDX.
I liked buying the dip in GDX – the risk was well-defined with an outsized reward.
The trade initially worked before it found resistance at a logical level of overhead supply at approximately 33.25.
If GDX undercuts our initial risk level – bail!
Don’t get me wrong: I remain bullish from a structural perspective.
But two crucial components must line up for a successful trade or investment: timing and direction.
If gold, silver, and the miners lose their pivot lows for late June, the timing is off.
And it’s time to kick out.
Stay tuned!
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Thanks for reading.
And be sure to download this week’s Precious Metals Report below!
Allstarcharts Team
