Silver is very close to its 2011 ($26.15) and 2012 ($26.11) lows - but is still above them. If silver breaks below $26 and stays there for 3 consecutive trading days, we will very likely suggest closing at least part of the long-term silver investment position. We will also suggest that if silver moves below $24.90 without an additional confirmation.

The soon-to-be-released self-similarity-based tool suggests a move to $26.50 in silver and $1,490 in gold (targets are calculated independently from each other). If gold moves to $1,490, however, it would mean that it moves visibly below its late-2011 and 2012 lows ($1,523) and also the declining support line (based on 2011 and early-2012 highs) and such a breakdown would likely lead to further declines.

Gold could actually decline to $1350 or $1,100 and still remain in a secular bull market (in mid-70's this gold retraced almost 50% of its earlier high). Don't panic - this is not a likely outcome. The consolidation is already almost 2-years long (2-years long in case of silver), investors are already very discouraged and the fundamental situation (QEs among other things) is in our opinion more favorable than it was in the 70s. The improvement of situation is even more visible in case of silver (much more uses of the white metal combined with smaller aboveground stockpiles). We do, however, want to make a point that a breakdown below the above-mentioned key, long-term support levels, is something that should not be ignored.

There is a long-term cyclical turning point in gold in May this year. We originally thought that it will mark a major top and thus be preceded by a huge rally. It now seems more likely that it will be where the major bottom is formed - not a top. This does not mean that gold has to decline extremely deep, though. If gold breaks below the $1,500, then $1,400 will become our next approximate target.

There were no breakdowns below the long-term support lines/levels in gold and silver, so we suggest remaining in these markets with your long-term investment. However, in case of the HUI Index, we saw a breakdown below the long-term support line and at the same time below the 50% retracement level for the whole 2000-2011 rally. This is also a breakdown below the 61.8% retracement from the 2008-2011 rally - and we have a confirmation of the same from the XAU Index.

This week's decline in miners is significant and it took place on significant volume. The breakdown was not verified in terms of time, and the question is if it was verified in terms of price. The HUI Index moved more than 3% below the support line. On one hand it's a lot, but on the other hand it is not that much given gold stocks' volatility. Plus, according to the RSI indicator the HUI is now more (!) oversold than it was at the 2008 bottom.

Overall, we don't suggest getting completely out of the long-term mining stock investments, but suggest getting out with half. We will probably either shortly suggest going back long or getting out with the other half - if the breakdown is verified in a more meaningful way.

Summing up, we suggest remaining in the market with your long-term gold and silver investments, but suggest keeping only half of the mining stock investments. We also suggest remaining long with half of your speculative position in gold, silver and mining stocks - based on the signal from the SP Indicators.

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

Thank you.

Sincerely,
Przemyslaw Radomski, CFA