We sold aggressively into this week’s breakout in gold and pop in silver, boosting cash reserves to ~50%.
Gold has risen over 3 standard deviations from its statistical fair value*, which afforded us an opportunity to book profits and reevaluate the shape of things. Though stocks performed well, they were generally wanting of momentum; consequently, the probability of substantial trend-changes in the very near-term is low. Gold and silver stocks will need to settle back gently and consolidate in order to mount another appreciable move upward.
We’d like to see Barrick settle back to <$15, for instance, before we make a new commitment to the stock, as its latest move describes a simple countertrend rally, as is the case for many of its peers, including Royal Gold.
$HUI now sports an edge of -13% and a discount of -4% which indicate gold stocks are a near-term sell. No shame in booking profits and waiting for a new entry at a more opportune time. I argue price is not a point in time, but a sum of a range of prices. In a trend — up, down, or sideways — one is presented with maximal and minimal prices. It is at the maximal and minimal levels that opportunities are optimal.
Here is a handful of stocks we are watching for new opportunities:
| Stock | Betting Edge | Discount |
|---|---|---|
| AEM | -17% | -6% |
| AG | -24% | -3% |
| AGI | -17% | -5% |
| ASM | -14% | -1% |
| BTG | -12% | 1% |
| CDE | -30% | -3% |
| DRD | -19% | -2% |
| EQX | -12% | 1% |
| EGO | -17% | -3% |
| EXK | -33% | -13% |
| FSM | -22% | -6% |
| GFI | -20% | -7% |
| GOLD | -12% | -3% |
| HL | -23% | -7% |
| HMY | -26% | -12% |
| IAG | -28% | -8% |
| KGC | -12% | -2% |
| PAAS | -15% | -3% |
| RGLD | -8% | 0% |
| SA | -29% | -16% |
| SVM | -19% | -5% |
*per our Betting (Odds) Engine
