The precious metals sector moved slightly higher yesterday in US dollar terms, however, the gold:UDN ratio actually declined yesterday and the same was the case with the silver:UDN ratio. The $HUI:UDN ratio moved higher by less than half percent yesterday. In other words, it was not the metals that rallied yesterday, but the dollar that depreciated that made them more expensive in USD terms.

The USD Index declined in the last several days (if you've been wondering, yes, it's been declining since the last cyclical turning point) which is something supporting higher gold prices. The point is that this had a smaller and smaller effect with each day and it was barely visible yesterday. This is a short-term indication that gold - and the rest of the precious metals sector will be moving lower relatively soon (gold stopped responding to positive factors). It could also be the case that the two markets (metals and USD) are moving independently from each other, but it seems to us that this is still an important clue.

We continue to believe that betting on lower values of silver and mining stocks is justified from the risk/reward point of view. It's probably a good idea in case of gold as well, but we are not as convinced, so we're staying out. In other words, we continue to suggest having speculative short positions in silver and mining stocks.

The stop-loss levels are:

• Silver: $25.30
• GDX ETF: $32.2
• HUI Index: 305

Here's the up-to-date version of our trading/investment plan:

1. When gold moves to $1,305 open a long position in gold (with $1,268 as a stop-loss level).
2. When silver moves to $18.20 close the short position and open a long position in silver (with $17.65 as a stop-loss level).
3. When the XAU Index moves to 84, close the short position and open a long position in the mining stocks (with 80 in the XAU Index as a stop-loss level).

The above ($1,305, $18.20 and 84) are also the levels at which we suggest getting back on the long side of the precious metals market with half of your long-term investments. We will send a separate confirmation to get fully back in.

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 May, 2013 and we will send additional Market Alerts whenever appropriate. We have prolonged the time in which you - our subscribers - will receive Market Alerts daily for another full month.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA