Gold moved slightly higher today and so did silver. Platinum seems to be confirming its breakout above its declining resistance line and USD Index is trading sideways. However miners are declining quite significantly, which is - for a lack of a better word - odd.

This is virtually the only thing that does not look bullish for the precious metals sector and miners' underperformance is a very short-term phenomenon. Consequently, we don't think that it should be viewed as something significant at this point. 

Miners to gold ratio (GDX:GLD) plunged today but moved to the 61.8% Fibonacci retracement level based on the July - September rally, so the trend still remain up. Moreover, the RSI indicator based on this ratio is now below 30 and this is something that accompanied local bottoms in the ratio and miners in the past. 

Our best guess regarding explanation of today's weakness in the mining stocks is that:

1. Miners are now "catching up" with their underperformance because of the recent poor performance of the general stock market. The SPY ETF corrected to its 200-day moving average and so has the GDX ETF.

2. This is the end of the decline and an extreme situation that marks it. If this is indeed the reason, then we are very likely to see a buy signal based on at least one of our Extreme indicators based on today's or tomorrow's market closing prices. 

As indicated we in the first 2 paragraphs of this message, we believe that the situation in the precious metals market remains bullish.

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