Gold, silver and mining stocks corrected on Friday and Monday and earlier today and these moves were accompanied by relatively low volume. This is a good and bullish sign. It's not an indication of weakness - it simply means that precious metals are taking a breather and gathering strength for another rally.

The situation doesn't look so bullish on short-term mining stock charts (for instance on the GDX ETF chart), but we are not concerned. The volume is much higher during upswings than during downswings, the previously reached support was not broken and the situation in the underlying metals looks great. The general stock market also appears to have bottomed (however we are far less bullish in this case than in the case of precious metals).

The USD Index moved higher than we expected it to, but as it was the case in the previous week - gold and silver seem to be able to rally even without the positive support from the US dollar. The USD Index looks about to form a top anyway, and when it does, we expect the rally in the precious metals sector to accelerate.

Additionally, platinum is breaking above its short-term declining resistance line today, which is another bullish development for the whole precious metals sector.

We suggest holding the speculative long positions in gold, silver and mining stocks and also holding your long-term precious metals investments intact.

As always, we'll keep you updated should our views on the market change - even if it means sending another message in several minutes.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA