We realize that it may be boring to read about the gold-USD link for a couple days in the row, but we also think that this is still the most interesting and significant phenomenon that we can spot on a short-term basis. Other than that, not much happened on the precious metals market this week.

Yesterday we wrote that "since it seems that the next big decline in gold will be triggered by the rising USD, we decided to take a closer look at the latter today." We continued:

"Actually, the short-term bottom in the USD Index may have already been reached or is very close to being reached - the dollar index moved very close to the medium-term support line created by the February and May bottoms. Precisely, it closed right at the above-mentioned line based on daily closing prices. The USD didn't move to the line based on intra-day lows, so we could still see a small downswing.

Therefore, a significant decline in gold and silver is likely just around the corner, even though we can see some strength on a very short-term basis."

The USD Index moved slightly below 82.40 earlier today, which is where the above-mentioned support line (the one based on intra-day lows) is currently located. Even though the USD moved a bit lower, precious metals didn't rally (today we saw a decline initially followed by a pullback slightly above $1,400), which is another confirmation of the underperformance. Taken together with the above, we have an indication that another decline in the precious metals sector could begin shortly.

All in all, we still think that gold will move much higher in the coming months, though we think that lower prices will be seen in the following days or weeks. Naturally, we will discuss the situation in greater detail in tomorrow's Premium Update.

Summing up, we suggest keeping speculative short position in gold and silver and being out of the precious metals market with one's long-term capital.

The stop-loss levels for the current short positions are:

• Gold: $1,428
• Silver: $23.55

We currently think that gold will temporarily move below $1,285, but pull back soon and close that week (the one in which it moves below $1,285) around this level. How low gold will temporarily go is unclear - perhaps it will form an intra-day bottom close to $1,200 or even $1,100.

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

1. When gold moves to $1,305 close the speculative short position in gold and get back in the market with half of your long-term gold and platinum investments.
2. When silver moves to $18.20 close the speculative short position and in silver get back in the market with half of your long-term silver investments.
3. When the XAU Index moves to 84, get back in the market with half of your long-term mining stock investments.

We will send a separate confirmation to get fully back in.

As far as trading capital is concerned we currently think that placing distant bids is appropriate. They may not get filled, but if we place them too high, we risk being thrown out of the market via stop-loss orders or margin calls if the volatility gets too high (and it's unpredictable how volatile the markets will get as gold is in a reverse parabola right now). If they don't get filled, we plan to go long after gold has pulled back significantly on an intra-day basis on huge volume (thus creating a bullish candlestick - probably a "hammer candlestick").

The distant buy price levels are:

• Gold: $1,120 (stop-loss: $970)
• Silver: $16.20 (stop-loss: $14.4)
• $HUI: 155 (stop-loss: 137)

As we wrote, these levels are distant and will probably not be reached, but if they do, they will present a great buying opportunity, one that will likely disappear almost immediately - that's why we we think that placing orders in advance is appropriate.

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 June, 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