During yesterday’s week, we saw breakdowns and major declines in all parts of the precious metals sector. Even the HUI to gold ratio broke below the key low. Yet, there is something that we saw based on last week’s closing prices that had 100% bullish efficiency in the past few years. What is it and how we can use this knowledge?

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There are many times when investors get confused about the precious metals market and now seems to be one of those situations. There have been multiple signs in place, but based on yesterday’s session, one of the most important ones seems to have been reversed. Mining stocks finally showed strength and refused to close visibly lower, even though gold did. Is it an early heads up that the decline has just ended? The reply is not easy as it requires understanding the situation not only in mining stocks and in the underlying metals, but also in the surrounding markets.

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Silver and mining stocks declined for yet another day, but this time gold ended the session with a (slight, but still) gain. How can we interpret the latter? Is it a sign of strength?

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In yesterday’s second brief alert we wrote that we may need to adjust the profit-take levels for our short positions. If the current decline is ending, as miners close to their target might suggest, then the target for gold should be moved higher. However, if the decline is just starting as gold’s breakdown seems to be indicating, then the profit-take levels for silver and mining stocks should be adjusted downward. Which scenario seems more likely?

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