The carnage continues. Time is a factor, so we’ll keep it short this time.

At the moment of writing these words, gold is at $1,227 and silver is at $18.55. If gold and silver get to $1,175 and $17.60 today (!), we suggest closing the speculative short position, as a bounce will be likely if we move that low that soon. We will plan to re-open the short positions soon. The most aggressive traders could even open a small long position in the precious metals sector if gold and silver move to $1,175 and $17.60 today. In general, this means that if metals decline once more by as much as they have declined so far today, we’ll likely see at least a local bottom.

Unfortunately, the situation is too unclear for us to set a target for mining stocks, so it seems that closing the short position in miners along with the one with gold (when gold moves to $1,175) is a good idea.

Actually, it seems that gold and silver could move to $1,160 and $17.30, but placing orders a bit higher seems prudent.

Please note that we changed the important price levels by adjusting them a bit lower (they were $1,190 and 18.20), so adjusting your orders might be appropriate.

Please note that we will also suggest moving back to the long side of the market with half of one's long-term silver investments if silver moves to $17.80, and also half of the mining stock investments if XAU moves to 84, and it seems very likely that it will move even lower today given gold's $50 drop so far. We will send a separate confirmation to get fully back in.

For now we suggest keeping speculative short position in gold, silver and mining stocks and being out of the precious metals market with most of one's long-term capital (exception: half of the position in gold and platinum).

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

• Gold: $1,383
• Silver: $22.55
• GDX: $28.20
• HUI Index: 262

We currently think that the precious metals sector will move even lower and we think that its link with the USD Index is currently the key thing to monitor. The USD Index is likely to pause or top when moving to 86.4 or so and the rally taking the dollar that high could trigger a powerful decline in metals and miners. Gold could very well decline to $1,100, silver to $14.70 and the HUI Index could decline to 150. They don't have to move that low, but these targets are not out of the question.

As far as trading capital is concerned we currently think that placing distant bids is appropriate as any potential moves down may be very volatile and prices may not stay there for long (perhaps only for several minutes). At the same time it seems to be a good idea to close the remaining short positions when gold, silver and mining stocks reach the levels featured below.

The distant buy price levels are:

• Gold: $1,120 (stop-loss: $970)
• Silver: $15.20 (stop-loss: $14.20)
• $HUI: 155 (stop-loss: 137)

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 July, 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