Gold and Silver Outlook 12-01-2014

Today’s movement in the metals market can only be described as volatile, but if anyone who had buy orders in to buy gold or silver at prices that were lower in Asia, they wouldn’t have got executed since the price had already rose quickly off the bottoms by the time the markets opened in Europe. And by the time U.S. markets opened, we were pretty close to where we closed on Friday. From there gold and silver kept moving higher.

My advice before the market opened was to play whatever went higher in the miners, and one could have traded JDST at one point or JNUG afterwards and made a profit off of each. Once gold broke $1,200 the play was simply JNUG as gold broke through resistance.

Here is what I wrote this morning before the markets opened.

The miners might set us up for a good trade again, but today’s a tough one to go either way. Just look for market makers to take you to profit by following what they do. Higher highs are a good risk versus reward trade.

Please read my morning update to see what I think about whether we have bottomed where I said we have not. From the NY close gold is down about $10 off those highs as I write. Silver is down 25 cents.

Why Did Gold Bounce?

There are many reasons as to why gold may have bounced today.

While the original reasoning for gold to fall was the failure of the Swiss referendum and we saw both gold and silver get hit hard in Asia, the rebound was swift in Europe. I made the comment in the morning update; “Remember, the Swiss want to weaken their currency, not strengthen it. To back it with gold would have strengthened it.”

The dollar was lower earlier in the day which gave gold a boost but has rebounded some and isl right at the 88 mark. A continued move higher will put pressure on gold so keep an eye on it.

It seems all commodities got a nice boost today including oil and natural gas along with palladium and platinum. Some of this could have stemmed from Moody’s downgrade of Japan’s credit rating.

Lastly India’s central bank eased curbs on overseas purchases. From Reuters;

Struggling with a high trade deficit, India last year imposed a record 10 percent import duty on gold and the so-called 80-20 rule to limit purchases. Bullion is the second-biggest item on India’s import bill after oil.

What’s Next for Gold and Silver

Despite my thoughts of gold and silver falling to lower lows still, one can’t ignore today’s price action. Both GLD and SLV weekly’s are now green. This is usually a show of strength. JDST weekly turned red which is a show of weakness. GDX had the biggest move with a score of -70 from -100. JNUG only managed a move to -90. Keep stops on anything you buy. Simple rule to follow.

Other ETFs I Watch

USO saw a move higher along with oil today and looks to be a play higher as long as oil moves higher with it.

I wrote this morning that I like UGAZ at 11.42 on the dip and it closed at 11.75. I still think buying the dip on UGAZ is a good play with a little risk to the downside but a safe play is to wait for a move under $11 and have a about a 10% downside risk. Being that it was just at 16 a few days ago, I like the risk vs reward aspect with even a 20% loss versus 60% gain potential (give or take a few percentage points). Of course anytime I am up big in a trade I sell and lock in profit, so don’t forget to take profit.

In Sunday’s Outlook I said “TZA bounced higher and is a play over Wednesday’s high of $13.42 and a safer play over last weeks high of $14.” TZA did go over $13.42 and ironically closed at $13.99, just shy of the “safer play” price. I would still use over $14 as an entry point with stops if you are not already long.