Despite choppy action last week in gold, silver commodities themselves, institutional options players seem to be positioning for further downside in gold, silver mining stocks.

Editor’s Note: Paul Weisbruch is the vice president of ETF/Index Sales and Trading at Street One Financial. an ETF liquidity provider focused on quality trade execution as well as portfolio construction and product strategy in the ETF space.

On July 1, gold commodity prices dropped sharply, over 4% in one session, causing gold-related ETFs such as SPDR Gold Trust (GLD ), ETFS Gold (SGOL ), and iShares Comex Gold (IAU ) to plunge through their 50-day moving averages. This move came abruptly, as the ETFs previously had traded above these levels continually since the beginning of April as gold followed a steady uptrend, relatively uninterrupted for months on end.

On July 2, Street One market technician David Chojnacki, who had previously been technically bullish GLD since mid April around the $111 price level, updated clients that GLD broke down last session below two important levels of support ($120.70 and $117.25) and is no longer a buy at these levels. Last week began with further weakness in gold, with GLD trading as low a $116.10 before rebounding to end the week and bumping up against its 50-day MA which was formerly support and is now new resistance, and closing below it, at $118.36.

Action has been similar in Silver ETFs, as iShares Silver (SLV ) and ETFS Silver (SIVR ) sharply sold off on July 1 as well, and have followed a similar path since, as the gold products.

Despite the choppy action last week in the gold and silver commodities themselves, institutional options players seem to be positioning for further downside in gold and silver mining stocks, perhaps believing that the weakness in the commodities is an impetus for a reversal of the longer term technical bullish strength in the gold and silver commodities and miners. In Gold and Silver Index (XAU), bearish combos have traded in the September 165, 170, and 175 strikes. In these trades, the institutions are buying puts and selling calls simultaneously, taking an outright short position in the index through the options with these strikes. XAU is composed of 16 gold and silver mining companies including sizable weightings in Barrick Gold Corp (ABX ), Goldcorp (GG ), Newmont Mining (NEM ), Freeport-McMoRan Copper & Gold (FCX ), and AngloGold Ashanti (AU ). XAU is an index, and not an ETF itself, so those looking to make a play on the miners and unable or unwilling to invest in XAU options will need to look elsewhere.

There are a handful of ETF alternatives that provide exposure to gold and silver miners. Market Vectors Gold Miners (GDX ) owns 31 gold miner names and tracks the NYSE Arca Gold Miners Index. with the largest weightings being in Barrick Gold Corp (16.29%) and Goldcorp (12.36%). Global X Silver Miners (SIL ), which is a newer ETF to market, but has been received well as far as trading interest and asset inflows, gives exposure to the silver miners by following the Solactive Global Silver Miners Index. Market Vectors Junior Gold Miners (GDXJ ) provides exposure to small- and mid-cap miners, for those looking to diversify away from the large-cap miner names. SPDR Metals and Mining (XME ) also falls in this camp to some degree, although the ETF holds companies that fall outside of the gold and silver miner sectors, including some steel and coal names such as Nucor Corp (NUE ), Peabody Energy (BTU ), Alcoa (AA ), and Steel Dynamics (STLD ), so the ETF will only peripherally trade with the rest of the group.

I’ll continue to watch the technical trends in the metals and mining sectors closely, as well as institutional option positioning, to attempt to gauge if the recent shakeout was simply a bump in the road in a longer term bull market, or perhaps a bearish reversal of a longer term trend.

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