Avi Gilburt--Metals Are Going Lower

So, many have asked me if I am still bullish on the complex, and my answer is yes, especially the very long term. While we have certainly dropped deeper than I had ideally wanted to see in gold, the patterns I am seeing suggest we are within a week or two of the final bottoming in this complex.

I am not of the "certain" belief that gold or silver will make a lower low relative to the one struck a year ago. While I certainly could be wrong in my assessment, and have been wrong at times about markets in the past, I have to go with what I am seeing based upon my overall perspective.

This past week, I have cashed in 20% of my remaining hedges on my long term long positions, which were bought when GDX was at 28.50. I also have the intention of cashing in some more over the next week. The main reason is that I use out-of-the-money options to hedge my positions, and the final tranches have become too large relative to my underlying positioning, so, I am actually over-hedged, since we have dropped so low.

Moreover, I still think we can see a little lower over the next week, and will likely be cashing in more of my hedges on those further lows.

So, while I noted in my last article two weeks ago that the "dreaded one more lower low may still be looming before we see that turn around in the complex," I believe this spike down can be that final capitulation in the market and the lower low which I was expecting.

And, the proof will be in the pudding. That means if we do not see an "impulsive" rally (Elliott Wave term of art denoting 5 wave structure) taking hold over the next week or two, which projects the GLD through the 112 region, silver through 17.50 and GDX through 22.50, then we may be setting up to break last year's low. It's time for the bull market to prove itself, or it will make a lower low below last year's.