A risk-off tone is blanketing the precious metal space as a key data point suggests more pain ahead…
Silver is underperforming gold.
Check out silver undercutting a shelf of former lows relative to gold:
The breakdown signals a lack of interest or risk-seeking behavior in the higher-beta vehicle.
When silver fails to catch a relative bid, the entire precious metals space tends to follow.
Last month’s breakout in the Silver Miners ETF $SIL is failing to hold:
It’s simple: We can’t carry a long SIL position if it trades below 28.
These stocks will eventually resolve higher. But sellers have the upper hand for now.
The Gold Miners ETF $GDX is also sliding:
The 30 level remains our line in the sand. I don’t want anything to do with GDX below that level.
It’s hard to imagine gold futures decisively breaking to new all-time highs while GDX trades below its former 2016 high.
The same analysis applies to the MSCI Global Gold Miners ETF $RING:
The next secular bull run for gold mining stocks remains on hold until RING trends above 25.50.
For now, both ETFs chop sideways to lower – not the most constructive action.
Even the golden child of the mining space – Alamos Gold $AGI – is correcting below our risk level of 13:
This is not bull market behavior.
Quite the opposite!
For now, we should clamp down on risk by moving our stops to breakeven.
It hurts to take a loss on a trade that showed a profit or, even worse, to watch a market run without you due to a lack of capital. Trust me, I have the scar tissue to prove it.
Brighter days lay ahead for gold and its related mining stocks. But you won’t be able to enjoy them if you don’t remain resilient by managing risk.
