We recommend keeping your gold positions. It seems clear gold is ready for some upside, asserts Omar Ayales, commodity sector specialist and editor of Gold Charts R Us.
Although gold is near the lows, more volatility and some further downside within the gold universe is still likely. However, we must reshuffle our strategy and position our portfolios to endure continued weakness without letting go of the upside potential gold still has to offer.
Also, consider gold's 'B' decline is near an extreme and a 'C' rise could start soon. And although we do not know what the 'C' rise will bring.
Will it be a mere rebound rise to gold's key "make or break" resistance at the $1365-1380 level or lower, or will renewed strength on a rise above this key resistance occur?
Gold shares are also showing extreme weakness. They too fell below key support with no clear bottom in sight. A bearish indication for the entire gold universe.
But our chart of the week is more flattering. It shows the HUI Gold Bugs index since 1997. Notice the secular uptrend and channel formed from the bottoms in 2000 and 2015.
The chart tells us gold shares are still bullish on a secular level, while nearing a key bullish support near 140. If HUI does hold at this secular uptrend, it could prove to be one of the best buying opportunities in a generation. Not only that, the fundamentals behind gold's secular and cyclical up moves remain.
But just because something is inevitable, it doesn't mean its imminent and current price action is telling us forces driving the market's trend could continue for a while longer.
All of this is pushing us to re-assess our strategy and positioning to protect our portfolios by keeping the strongest positions and letting go of the weaker ones within the gold realm.
We should continue having exposure to gold shares and gold. However, we're reducing our exposure even more and until price action shows clearer bottoming action.
Our buy order for Wheaton Precious Metals (WPM) was triggered as its slipped below $20. We bought some. If you didn't, buy some at market. Kirkland Lake Gold (KL) also dipped below $20. We bought some too.
At this point we should only have two gold shares. These two companies - Wheaton Precious Metals and Kirkland Lake - are not only showing the best price action, they have strong fundamentals backing them too. We will ride through weakness with both of these.
