Wow! Just as my forecast models showed over the past few weeks, heading into the end of May would be a DOWN month for the precious metals and for mining shares.
Gold has plunged as much as $94.80, or 7.26% since its high on May 2 … and mining shares have plunged an average of 17.6% basis the HUI, or Amex Gold Bugs Index since the second of May.
So is the decline I’ve been warning you about over now? Is the long awaited pullback that so few believed in finally here? Is it time to go long gold, other precious metals and mining shares?
Let me answer those questions right away, with my latest Artificial Intelligence (AI) Models and neural net forecasts for gold and mining shares.
No, the decline is not over. Not for gold, silver, platinum, palladium, or the mining sector.
Here is my updated gold AI Neural Net model. What has happened is this: Gold is following the model to a tee, as you can clearly see – but it now appears that the final low, previously forecast for the end of May/early June … has been stretched out to June 21.
Keep in mind that dynamic cycles often contract and expand within a certain range of statistical variance, as opposed to the light blue line on the chart which is one of gold’s more important fixed cycles (that I sometimes use for additional guidance, and which, in this case, also lines up perfectly with the June 21 date, adding further evidence that the June 21 period will be very important for precious metals and miners.)
In this case, gold’s cycle low for this period has stretched out almost three weeks in time, which is more than normal statistical variance would call for, which is about 1 to 1.5 weeks.
Why am I pointing this out? Simple. Remember the webinar earlier this month when I told you the target date for gold’s slump would be for it to start on May 20?
Well, it didn’t. It started instead on May 18, the day April’s Federal Open Committee Meeting Notes were released, which showed an increasingly hawkish Federal Reserve Board willing to raise interest rates come its June meeting.
That June meeting is scheduled for June 14/15. Given the slump started with the release of the notes on May 18 – I would not be surprised to see …
A. The Fed raise rates June 15.
B. Precious metals and mining shares essentially continue to tumble into the same date.
“But Larry – you ask – the market seems to be already discounting, or factoring in, a June rate hike. So perhaps it won’t fall all that much more and we may risk this secondary, all-so-important bottom?”
Normally I would say “Yes, the market is now probably already factoring in a June rate hike.”
But there are three forces that lead me to believe that it’s not fully factored in and that gold and related assets can fall much further into June 21.
First is the degree of the slide into June 21 shown on this chart. It’s very sharp, very steep.
Second is the fact that gold has now shattered support at the $1,240 level and is now threatening to shatter closing support at $1,226. Closing below that level today would be enough to keep the downside pressure on gold heading into June.
Third is the fact that the latest Commitment of Traders report (COT) shows yet again another record high of speculative long positions in the gold market. Do not underestimate this. It is extremely bearish.
Major support still lies at $1,206 in gold and that is the level I expect to give way, which would imply a true test of major, long-term support at the $1,140 to $1,160 level come June 21.
If that happens – and I expect it will – I will be telling you to back up the trucks. As, many as you have, big and small.
Bottom line: Gold, the precious metals and mining shares are all moving your way. Hold all related positions and associated protective sell stops.
That includes the new SPDR Gold Share Aug-16 121 Puts (GLD160819P00121000) and ProShares UltraShort Silver Aug-16 40 Calls (ZSL160819C00040000), both of which are doing well.
Note: On May 18, DUST did a 1 for 10 reverse split. So if you purchased shares in DUST, you now have 1/10th the number of shares as before, with each share valued at 10 times its original acquisition price. Your broker should have automatically raised your good-till-cancelled protective sell stop from $1.15 to $11.50 on a good-till-cancelled basis. Check and make sure, just to be on the safe side.
Also, if you purchased Direxion Daily Gold Miners Bear 3x Jun-16 2 Calls (DUST1160617C00002000), those were also adjusted for the split and should now be showing in your account with a new symbol. Each contract that you own can now be converted into 10 shares of the new DUST shares. There is no change in the value, simply a 1 for 10 reverse split.
Meanwhile, the euro has also resumed its slide, and the dollar its rally. This is good news for the euro positions, which include ProShares UltraShort Euro Jan-17 28 Calls (EUO170120C00028000) … ProShares UltraShort Aug-16 24 Calls (EUO160819C00024000) … and the underlying inverse ETF for the euro, ProShares UltraShort Euro (EUO).
Have a wonderful holiday weekend!
Stay tuned and best wishes,
Larry
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