Continuing our discussion regarding silver's and miners' performance relative to gold, it currently seems that Friday's strength was just a temporary phenomenon. The pattern didn't continue on Monday and Tuesday. In fact, silver moved close to it's Friday low, just like gold did. Miners are below that low.

The volume increased slightly yesterday along with lower prices, which is a small bearish confirmation. At the moment of writing these words, gold and silver have declined once again - $15.30 and 0.47, respectively. The decline, albeit small so far, seems to continue, just like the move higher in the USD Index does.

Speaking of the USD Index, it just closed above the March high and is quickly approaching its 2012 high (84.10) - at the moment of writing these words it's trading at 83.97. Another thing that's approaching is the next cyclical turning point - it's about a week away. At this time it's unclear, however, whether USD will really decline, or will the turning point simply trigger a consolidation that we would expect to see anyway after a breakout above an important resistance level (and the 2012 high - 84.10 - is definitely one). Please note that USD Index consolidated in a zig-zag pattern in April, so from a medium-term point of view, the current rally is not excessive and a bigger correction doesn't appear imminent. Consequently, even if the USD Index seems overbought on a short-term basis, the analysis of the medium-term picture suggests that an eventual correction may not provide a major bullish impact for precious metals, as it might not be significant enough.

Overall, the trend lower seems to continue. If USD Index moves above its 2012 high and verifies the breakout and metals respond with a decline, we may suggest increasing the size of the short positions and opening them in gold as well.

Summing up, 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 that 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