Gold and silver rallied today before the opening of the main stock exchanges in the US even though dollar moved slightly higher today. Should this make you concerned? We don't think so. On Friday and Thursday dollar declined, moving to the levels at which it more or less it started this year. At the same time, on Friday, gold and silver closed visibly below the levels that they reached at the beginning of 2013. Consequently, the precious metals market is likely simply catching up today.

Is the rally sustainable? Very. Gold is after an extremely long consolidation and the same - even to a greater extent - can be said about silver. Mining stocks' consolidation is even more profound. As we mentioned in the previous Premium Updates, banks are cutting their price forecasts for gold and the sentiment for the whole precious metals sector is not even close to being positive. This means that there are many investors with lots of capital who can join the rally and push prices much higher.

As we mentioned last week, it's the first half of January, 2013 and at this time of the year precious metals have traditionally rallied. The odds are that the "seasonal wave" will help gold and silver move higher. In fact, the true seasonal tendencies will remain favorable for the precious metals market until the third week of February, which leaves plenty of space for a rally.

With the above in place, the question is - why shouldn't gold and silver rally right now? We don't see any strong fundamental reasons for any significant delay in the rally and at this time we view the technical picture as favorable as well. The thing that doesn't look too good is the gold priced in the euro chart, as gold closed the week below the rising support line, however, this line was temporarily broken several days ago and the breakdown was invalidated - with other charts in the bullish mode this is likely to happen again.

Platinum moved sharply higher once again today and if moves another $20 higher without a rally in gold it will once again become more expensive than the yellow metal. This is something that we view as very likely in the coming weeks and months and we suggest moving some of your gold assets to platinum if you haven't already done so (according to our gold and silver portfolio).

All in all, we think that the rally in gold, silver and mining stocks will continue in the following weeks.

We didn't see a buy signal from the SP Indicators on Friday and consequently we suggest closing half of the speculative position in the mining stocks today. At the same time, we would like to emphasize that the SP Short Term Gold Stock Bottom Indicator is below its signal line which implies that a buy signal for mining stocks will be seen as soon as mining stocks show some strength and the indicator moves a bit higher. With rallying gold and silver today, the odds are that we will see a buy signal based on today's closing prices and that we will suggest doubling the long position in the mining stocks once again tomorrow.

Just as we indicated on Friday, at this time half of the long position is suggested for gold and silver.

We will probably see a buy signal in the SP 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.

For new subscribers - please refer to our gold and silver portfolio page for more details on the meaning of the above comments.

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.

Sincerely,
Przemyslaw Radomski, CFA