The Euro Index has been moving higher yesterday and today and the opposite can be said about the USD Index. Overall, metals didn't do much today and yesterday, so the implications are not that bullish. The moves in currencies were far from spectacular as well, so the whole currencies-metals link is simply unclear at this point. Our best guesstimate is that the dollar will continue to move lower and that the precious metals sector will start reacting positively, which will make us suggest going back to the full long position with your speculative capital. Please note that this does not mean moving back in now; it also doesn't mean going long in the future with your whole speculative capital - it would mean increasing the size of the position from say 2% of your speculative capital to 4% (or from 3% to 6% - please see our portfolio structuring essay for details).

The interesting thing that happened on the precious metals market was the fact that the MACD indicator based on the SIL ETF (proxy for silver stocks) has finally flashed a buy signal. The last time it happened in late July and was soon followed by a $100+ rally in gold and a $7+ rally in silver. We are therefore close to suggesting moving back to the full long position, but not there yet. 

Summing up, we suggest keeping long positions 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.

In other news, while the vast majority of what we post as free commentary is based on our Premium Updates, we have just posted an article that was not based on an update, so you might be interested in reading it. Actually, it's a follow-up to the article that we posted last week. The first essay was about gold's usefulness if the dollar collapses and today we focus on gold's attractiveness if the USD is not destroyed in the future. Additionally, today's essay includes a big gold chart that adjusts the 1980 high to today's prices according to official and unofficial inflation numbers. You can access these essays using the following links:

What Can Happen with Gold If the Dollar Collapses?

Can Gold Make Sense If the Dollar Does Not Collapse?

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