The precious metals sector moved higher yesterday. Gold finally responded to dollar's weakness to some degree. The move higher was barely visible in case of silver and mining stocks.

There is a long-term support line very close to where the USD Index is right now. The support line is based on August 2011 and February 2013 intra-day lows and is currently at about 80.40. This level is could be - realistically - achieved in a day or a few given the recent volatility in the USD Index. In fact it was almost reached in today's pre-market trading. There's one more interesting thing about the USD Index - its cyclical turning point is just a week away. The USD Index appears close to forming an important bottom relatively soon.

For several days a reversal has been quite likely based on the long-term breakout, but it was not very likely so far (which didn't matter much for precious metals as they were underperforming the USD Index anyway and didn't manage to rally despite dollar's decline). Now it appears that this short-term declines' days are numbered and at the same time it seems that gold, silver and mining stocks will move lower relatively soon as well.

Summing up, we suggest keeping speculative short position in gold, silver and mining stocks 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
• GDX: $31.3
• HUI Index: 292

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 (yes, the current lack of reaction to dollar's weakness might be suggesting a move that low).

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, close the speculative short position in mining stocks and 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