*The following Premium Post was issued to TLS members on November 24, 2020.*
The gold complex is getting routed — what are we doing about it?
As you know, we have been quite bullish on the precious metals complex, including gold, silver and gold miners, for some time…at least since August 2018 when sentiment toward the metals became about as dour as it gets (btw, neither gold nor the gold ETF GLD [~111 at the time] have been lower since). Of course, that was the time to be buying [gold miner ETF GDX was ~18] — when blood was running in the golden streets. The rally since has been epic — especially following the important trend break in June of last year as noted in several DSS posts at the time [GLD ~130 and GDX ~24].
Of course, nothing goes in a straight line forever so profit-taking eventually becomes the prudent move. For the gold complex, the time to book profits was clearly in late July-early August (as we noted at the time). That’s when gold and GLD arrived at a test of their respective 2011 all-time highs [GLD ~186] — and when GDX [~45] and other key gold miner indices reached the 61.8% Fibonacci Retracement of their 2011-2016 declines. For those reasons, we took substantial profits at the time.
That profit-taking was with the idea that we would buy those portions back after an expected healthy consolidation or pullback, provided there was no evidence that the longer-term uptrend was invalidated. We have gotten that consolidation/pullback and see no signs of a longer-term uptrend invalidation. Therefore, we are now starting to buy back the gold/miner exposure we sold back in July/August. Specifically:
- Yesterday, we bought back some GLD ~172…we will buy more ~165 and ~158 (if it gets there)
- This AM on the open, we bought GDX ~33.26 and GDXJ ~47.76
As always, stay tuned to our DSS posts for further developments — they provide the most current updates to our investment portfolio and outlook.
Disclaimer: JLFMI’s actual investment decisions are based on our proprietary models. The conclusions based on the study in this letter may or may not be consistent with JLFMI’s actual investment posture at any given time. Additionally, the commentary provided here is for informational purposes only and should not be taken as a recommendation to invest in any specific securities or according to any specific methodologies. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.