One thing I feel has gotten lost in the whole “Stocks and Bitcoin make all-time highs every day” rhetoric is the overwhelming weakness in precious metals. Gold, Silver, Platinum and Gold Mining stocks are all making new lows, resuming their trend of lower lows and lower highs.
We’ve been aggressively bearish Gold, Gold Mining Stocks and anything precious metals really since October. Based on what we’ve seen since then, I see no reason to change our approach towards this market. To the contrary, I think the selling we’ve seen come in confirmed everything we had been seeing in September – a bunch of people getting caught long in a bull trap. It was classic.
Here is Gold now breaking the uptrend line from last year’s lows. These are not characteristics of uptrends:
This is Silver doing the same thing:
And Platinum if you’re interested:
On the stock side, here are the Gold Miners that we’ve wanted to be short for a while:
Same thing with the Junior Gold Miners. This is $GDXJ breaking the uptrend since late last year:
One of the biggest reasons why we’ve been so bearish is because we have not seen any evidence of risk appetite, just the opposite. When we look at the Silver vs Gold ratio, it historically goes up during an environment when precious metals are rising. When metals are falling in price, Silver’s losses tend to be much larger than the Gold losses. This ratio has always been a great indicator for us to measure risk appetite for metals. We can see this here:
On top is the Silver/Gold ratio and on the bottom is an equally-weighted index I created with Gold, Silver & Platinum, to get a good idea of the direction of the trend for precious metals as a group. It appears to me that the path of least resistance is still lower.
We still want to be short the precious metals space across the board like we have been. I think we likely go on to make new lows in the equally-weighted precious metals index, which means a lot more selling is likely coming for the entire gold space.