This week started quite good for the gold market. Yes, gold closed more or less at the same price level on Monday that it did on Friday (after an intra-day decline) but the USD Index moved higher and consequently, on average, gold rallied in other currencies. The gold:UDN ratio is now above the declining resistance line - an unconfirmed breakout. Gold moved $8 lower in early trading today, but this move is well within the small horizontal trend that creates the handle of the cup-and-handle pattern. Nothing to be concerned about, in our opinion.

In other news, crude oil has moved higher recently and is right now once again close to the declining long-term support line. Here's what we wrote about crude oil on March 8, 2013:

With some consolidation having been seen here, the odds for a breakout are much higher (60% or so) than they were a few weeks ago (40% or so). With higher stock prices and lower USD Index values, we expect the breakout in oil prices to materialize soon. Such a development could take other commodities as well as the precious metals to higher price levels.

The RSI indicator is actually below the 50 level - a bigger move could definitely be seen here.

Crude oil actually bottomed at that time and is now attempting to take out the resistance line once again. The RSI is no longer overbought (below 60) and it seems that crude oil will manage to do it this time (60% probability in our view). The implications for the whole commodity sector, including precious metals, are positive.

Meanwhile, the Broker/Dealer Index (proxy for the financial sector) moved below its previous 2013 and 2012 highs this week. The breakout was therefore invalidated. If financials close below these highs on Thursday, we will have a bearish sign for the short term, also for the general stock market.

Full speculative long positions are suggested for gold, silver and mining stocks.

Naturally, we suggest remaining in the precious metals market with your long-term investments. In particular, don't let the bearish analyses, declining prices or sideway moves make you sell your long-term precious metals investments. It's a good time to be adding to the long-term gold & silver investments, not a bad one.

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 March, 2013 and we will send additional Market Alerts whenever appropriate.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA