If you've been wondering why we were careful yesterday and didn't move back to the long side of the market - you got your answer if you looked at today's price moves - because such price action was too probable. Gold and silver moved to their December lows (in terms of closing prices) and miners didn't - the latter merely corrected yesterday's rally and are visibly above their December low. This would be a very bullish factor if it wasn't for the fact that it's not a big achievement for mining stocks not to move so low just because they declined so significantly in the previous weeks. 

Fed's recent reassurance regarding its will and ability to "help the economy" by printing more money and keeping rates low seems to have been already priced into the previous prices and markets didn't do much. This is, however, another bullish factor for the medium term as far as the precious metals are concerned.

In other news, the buy signal from the SP Extreme #2 indicator (the one that we reported on Dec 3, 2012) has just expired. While this doesn't affect positions in the mining stocks because they are currently on a different buy signal (the SP Short-term Gold Stock Indicator suggested going long miners for 2 weeks based on Dec 7, 2012 closing prices), the long positions in gold and silver that were opened based on SP Indicators should now be closed. It's quite likely that we will see another buy signal soon (perhaps with gold at its 300-day moving average which is currently at $1,674), but right now indicators suggest no position in case of gold and silver. 

Summing up, we suggest being speculatively long mining stocks with half of the capital that you would normally use and we suggest being out of speculative positions in case of the rest of the precious metals market. We suggest keeping 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. 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. Naturally, the next Premium Update will be posted tomorrow and it will include much more detailed analysis than what you read above.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA