Just as the beginning of the last session of 2012 was calm, it was its final part when many assets showed strength, including stocks, and most of all, precious metals and mining equities.

The likely trigger for the rally was the fiscal cliff deal - you can read more about it here.

We had been expecting that a solution would be reached and that it would be reached at the very last moment, but the markets appeared to be positively surprised and rallied strongly. We expect the "kick the can down the road" approach to stay in place for the following months as well.

Gold priced in the euro is back above the rising support line. In the latest Premium Update we wrote the following:

"In the gold to euro ratio chart, we have the only gold chart where we see that the breakdown has not been invalidated. RSI levels are not much above 30, so further short-term strength is suggested here. If the breakdown is invalidated, the picture then would become clearly bullish."

The breakdown was invalidated and the picture is once again bullish.

Gold viewed from our regular (USD) perspective rallied on significant volume on Monday which is a bullish sign as it invalidates the bearish analogy to the final days of 2011. Has gold broken above the 300-day moving average? In terms of the GLD ETF - not yet. In terms of the spot gold price and in terms of weekly closing prices (60-week moving average) - yes. In terms of spot gold price and in terms of daily closing prices - almost - gold closed $0.38 below it. However, taking into account today's rally in gold (it's at $1,685 at the moment of writing these words) we view the move above the 300-day moving average as "almost confirmed". Translating this from "Investor-ese" to plain English, we think that it's relatively safe to say that gold is once again above the 300-day moving average and the implications are bullish.

Silver is rallying today and since it is just at its cyclical turning point, it seems that the next big move will be to the upside (as the last major move was to the downside).

Silver stocks - precisely the MACD based on the SIL ETF - have once again flashed a buy signal.

In fact, mining stocks (GDX ETF) rallied as the Short-term Gold Stock Bottom Indicator had indicated several days ago, and the rally materialized on strong volume, which is a bullish phenomenon.

All in all, the situation has improved dramatically this week. We believe - based on the above - that it's a good idea to open speculative long positions in gold, silver and mining stocks.

At this time half of the long position is suggested for gold and silver and full long position is suggested for mining stocks.

We will probably see a buy signal in our indicators shortly, which will make us suggest doubling the long position in gold and silver, but that's not yet the case.

Naturally, we suggest remaining in the precious metals market with your long-term investments.

As always, we'll keep you updated should our views on the market change. We will continue to send out Market Alerts on a daily basis (except when Premium Updates are posted) at least until the end of January, 2013 and we will send additional Market Alerts whenever appropriate.

Thank you for using the Premium Service!

Sincerely,
Przemyslaw Radomski, CFA