Precious metals were left for dead at the end of 2013, but all shiny assets are off to a strong start in the new year. Precious metals miners have been leading the bounce, which is a strong indication of the long-term sustainability of this bounce relative to prior moves higher. The GDX/GLD ratio is the most obvious indication of this increased risk appetite:
The ratio is cleanly above its 150 day moving average for the first time in more than a year.
Overnight, silver broke out to a new 3 month high. Silver has been a laggard among the precious metals complex, as the miners and gold have both led silver over the past 6 weeks. But silver is catching up this week, approaching its 150 day ma this morning after the break above the 3 month base:
Gold is higher overnight as well, slicing through its 200 day moving average for the first time in a year as well. Gold broke out to a new 3 month high earlier this week. Silver’s break higher confirms the move for the complex as a whole.
Our first trade of 2014 was a long GLD call spread, which we sold for a nice gain earlier this week, though too early in hindsight. We still own GG in our investment portfolio (updated thoughts on Tuesday). This move higher in precious metals likely has some staying power after the base that has formed over the past 6 months.
The larger resistance levels are 130 for GLD and 22 for SLV. Those are the levels that are likely going to be more difficult to break on the upside on the first test. However, the broader trend has likely changed for precious metals, where the bias for now is to buy the dip rather than sell the rip.