Saturday, January 25, 2014

precious metals complex -- still in play

the precious metals complex has shown some signs of life since the updates I provided in early December. While I did initiate the buying program laid out for FSAGX (the Fidelity gold fund), so far I've only managed to allocate 60% of the portfolio into the fund. the remainder is still in cash. a couple purchases were made right about the lows but over-cautiousness and/or professional distractions prevented me from pulling the trigger enough times when the fund lingered below 18. a few more buys I made after mining stocks entered their rally this month. in any case, I'm happy with the cost basis of the position we have so far, but hesitant to add more in the absence of a consolidation.

furthermore, I haven't completely dismissed the possibility of gold itself making a final plunge to that long-standing target of 1145. perhaps the opportunity passed when the spot price held 1180 over the holidays, but it would be premature to assume that gold has fully escaped its downtrend.

such a pretty channel, no? we'll find out soon enough, but a single candle peeking above a trendline doesn't confirm a breakout.

silver, even though it showed so much courage last month amid gold's weakness, remains well within its downtrend channel.

but on the bright side, mining stocks have seen motivated buying, with the HUI more definitively breaching its corresponding channel.

while it's a positive development, we shouldn't get too excited about a violation of a simple trendline. nevertheless, even if the complex takes another hit, I would expect HUI to hold at least the 200 level.

to wrap up, I am positive on precious metals and encouraged by the price action the last several weeks. if prices drop from here I'll add to the mining stocks position, but since we have a decent amount already, continued appreciation won't bother me at all.