Friday's price action in gold, silver and miners was not really meaningful, but what we see today on the gold market is quite encouraging. Gold rallied despite the lack of decline in the USD Index - meaning that it rallies also in terms of other currencies, such as the euro. 

Speaking of gold priced in euro, in our latest Premium Update we discussed the situation on the gold:XEU ratio and we wrote the following:

"More importantly, the RSI has touched 30 and this has usually been quickly followed by rallies (note red arrows in the upper part of the above chart) in the past so the local bottom may already be in here."

The move higher in gold priced in euro continues and the same can be said about the RSI indicator based on it. 

Is it enough to make us suggest that you should go long gold, silver and mining stocks (precisely speaking, to increase the size of the long position)? Not really, because neither silver, nor mining stocks are following gold's footsteps today. SLV moved above its 50-day moving average and miners (GDX ETF) are once again above their 61.8% Fibonacci retracement level based on the July - September rally, but we believe we should wait for a bit more strength before declaring that the situation is clearly bullish.

We have an additional comment that is not based on current events nor on chart analysis, but rather on self-analysis. Based on our experience, when - after a bigger consolidation or decline - we get the "feeling" (!) that the bottom is not necessarily in and the short-term is unclear but at the same time we think that gold will move much higher in the coming months, it is exactly the major (!) bottom or very close to it. We realize it's not that helpful in terms of speculative trades, but it is another reason to keep long-term positions intact.

We have also seen a buy signal in the SP Short-Term Gold Stock Bottom Indicator, which suggests that miners should be held speculatively long for at least 2 more weeks.

Summing up, we suggest keeping long position in gold, silver and mining stocks without any increase in the size of the positions (half of the position that you would normally have when going long). Again, we believe that long-term investments in the precious metals sector should be left 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. We will also continue to send you Market Alerts on a daily basis (with the exception of Fridays when Premium Updates are posted) at least until the end of December.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA