Previous week (and the first several hours of this one) was quite shocking to those who believed that precious metals can move only in one direction (up). However, price of no asset can increase indefinitely in real terms and there are many corrections even in the strongest bull markets. Last week we saw one of them. Precious metals plunged and our target levels have been hit (in case of the HUI Index the final target was not reached but will likely be reached today based on the pre-open slide in PM prices).

We estimate the probability of the current price levels being the final bottom at 55% and being a local one at 70%.

Therefore, if you didn't close your speculative short position yet, we believe it's a very good idea to do so now. Moreover, betting on the rebound after the big plunge (we are writing this right after silver moved very close to the $26 level) appears to be a good idea as well.

The initial upside targets are $1,700 for gold, $33 - $34 for silver and 560 for the HUI Index.

We have previously mentioned getting out of the market with one's long-term capital dedicated to silver and mining stocks. We believe that one's long-term investment capital should now be moved back to the precious metals market. It's not yet certain that this is the final bottom for this decline, however in case of the long-term capital it's best to make transactions when risk of buying at a top is particularly low and we are definitely at one of these points.

If you get the feeling that this decline should have been traded with your long-term capital, please note that we could have seen an explosive rally here - for instance in silver - based on its fundamental situation (short covering in COMEX) - and you would definitely not want to miss that particular rally. It's all about probabilities and scenario analysis and we continue to believe that dividing one's capital into speculative and long-term parts is the best approach. You will find more details here: http://www.sunshineprofits.com/research/universal-investor-speculation-a...

As always, we'll keep you updated if anything changes.

Thank you.

Sincerely,
Przemyslaw Radomski