Portfolio Update

Portfolio Update: Initiating Long on Gold Miners (GDX) and Adding to Silver (SLV)
  • Initiating 5% Long Position on Gold Miners (GDX)

  • Adding 5% to Silver (SLV)

Buying Gold Upside Through Gold Miners (GDX)

We’re initiating a 5% long position on Gold Miners through the GDX ETF.

We posted a Macro Note yesterday highlighting opportunity in recent weakness in Gold Miners (GDX) and Silver (SLV) due to May’s countertrend rally in the dollar and rise in U.S. real yields.

We expect the dollar and U.S. real yields to revert lower as a recession comes to fruition in the second-half of this year. Recent weakness in GDX offers opportunity to buy at favorable levels.

Aside from acting as a leveraged bet on the gold price, Gold Miners would also help hedge our portfolio against our lack of exposure to equities.

In prior work, we’d highlighted that in a regime of rising gold prices, Gold Miners stand to outperform the S&P 500. That asymmetry is an attractive feature of the trade.

Our tactical work on gold miners highlighted superior technicals for Gold Miners (GDX) over junior ones (GDXJ). That helped informed our decision to favor GDX.

GDX remains in an upward price channel while bouncing off key support. Our 6-12 month target is $40.

We’re initiating a 5% long position on GDX. That brings our combined gold-related allocation to 20% when our GLD position is included. The addition of GDX will be funded via cash (BIL).

Adding to Our Silver (SLV) Position as Bet on Dollar Weakness

As also detailed in yesterday’s Macro Note, we’re also taking advantage of the recent weakness in silver (SLV) resulting from the countertrend rally in the dollar.

SLV is bouncing off key support while moving averages continue to trend higher. We expect SLV to break out of its price channel in the next phase of the metal’s bull run.

We’re boosting the SLV allocation by 5 percentage points, bringing the total position to over 10% of the portfolio. Our target for SLV is $26. The increase in SLV will be funded via cash (BIL).

Below is the updated GOT Model Portfolio.

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12 comments

  1. (6) 6
    Palmer says:

    Would love a little more color again on the weak dollar thesis. Yes, historically that has happened in recessions, but I think other central banks will “out dove” the Fed. Potentially hugely so during this coming global recession. I could see safe haven dollars remaining strong through this.

    1. (0) 0
      Chancey says:

      Completely agree with this and the technicals analysis breakout of the downtrend backs this up also

  2. (0) 0
    Apoc says:

    Talk about instant gratification on the GDX trade haha!! Not that it means much with a 6-12 month horizon. Still nice to see that work out as it has, hope we retrace a little of today’s move so I can get in there on the addition – hindsight should’ve just initiated this morning – but was hoping for a snag below 31 and we ripped right up to 32! Curious how you navigate a short term burst as such. With a shared time horizon, wondering if you’d still take the trade and if I’m splitting too many hairs so to speak – thanks.

  3. (0) 0
    Kenneth Charbauski says:

    Peter and Team, just wondering if you can explain some behavior on BIL.
    June 1 BIL.IV was 91.3948 which is consistent with the ex-dividend price in the pre-hours of 91.399301. However, MMs opened trading at 91.44×91.45 where it remained most of the day.
    So it seems one should sell BIL on the first of the month after receiving the dividend which may be a loss leaving a wash sale. Do you know why there is a premium for BIL at the beginning of the month?

    1. (0) 0
      Apoc says:

      Would be interested in hearing a breakdown of BIL also – I noticed last month, after forgetting to add to my BIL position on the 1st of the month, I actually got a cheaper deal (by 2 cents) the 2nd day – maybe it’s strong buy demand on that monthly open? Idk, great question.

  4. (1) 1
    Franacesco says:

    Sorry how can you put $21.61 as a entry for silver the 31/05? It didn’t go below $23 that day…

    1. (1) 1
      GOT says:

      @Franacesco We added SLV, the silver ETF. We believe you’re referring to silver futures, that’s trading at higher prices than SLV. We hope that answers your question.

    2. (0) 0
      Piggybank says:

      $21.19 was the lower of the day. Are you sure you are pricing in dollars?

  5. (2) 2
    scibill says:

    Why not invest in PSLV which is backed by physical silver?

  6. (1) 1
    christopher ogrady says:

    I have to say I am beginning to question your thesis/strategy/GOT’s. Sure we can sit and wait until there is a recession but, hey, we will have one! Eventually!

    1. (4) 4
      Apoc says:

      “The thing to do is to keep your mind when the world around you is losing theirs.” – Warren Buffet

      Questioning others’ perspective, data, evidence and presentation is healthy imo. Blindly following another man is foolish. Whatever path we choose, we must own it as our own.

      For what it’s worth, my portfolio has some components of the model portfolio, but it’s far from an exact match. I take ideas and evidence presented to help inform my decisions but in the end, my portfolio is mine and mine alone. I’ve stayed in trades longer than the model portfolio and I’ve exited earlier than model portfolio. The biggest thing I’ve come to realize is how attractive and powerful holding cash is in yield bearing instruments such as BIL and CDs. Cash is agility and powerful when an opportunity presents itself. Before joining this service I often felt that holding cash was a fools errand. On the contrar, I was the fool. Now my focus is balance. We go up – I am content. We go down – I am content.

  7. (0) 0
    Mozi says:

    Hello @gameoftrades.net @GOT I have Vix calls strike 20 expiring Aug 15. The are underwater as I did not have them when you guys took profit. I am thinking of rolling them to buy myself more time. Is now a good time to roll or perhaps wait until Mid July to give them time to print on a summer sell off?

    Thanks