Let's start today's alert with the actionable part of the summary. We suggest going long with half of one's silver long-term investment capital. The suggestion now is to be 50% invested in case of the long-term investment capital (gold, silver, platinum, mining stocks).

Having said that, let's examine what happened and what did not happen on Friday and where the precious metals market is likely to move next.

First of all, metals and miners declined but the decline was relatively small compared to the rally in the USD Index. We are getting more convinced that the next move in the metals market can be to the upside, not to the downside. There's a big "however" in this case.

The Euro Index is completing a bearish head-and-shoulders formation. In fact, if you measure it in terms of weekly closing prices (and daily closing prices, but to a small extent), it was already completed on Friday. A slide all the way down to the July 2012 low (the 120 range) has just become more probable. Such a decline would mean a huge rally in the USD Index. Can such a rally materialize in the dollar index if it rallied so sharply recently? Yes - it's only overbought on a short-term basis.

The long-term USD Index chart features a breakout above the declining resistance line at the beginning of 2013, then a pullback almost to the 80 level and the previously broken resistance (it was not touched but that is not necessary for the breakout to be verified). It clearly looks that we should expect a continuation of the rally right now. The USD being overbought on a short-term basis doesn't have to stop this upswing. A more powerful, long-term resistance might be able to do that, though. The next significant resistance in the USD Index (based on 2005 and 2010 highs) is slightly above the 86 level, at 86.4.

Given the head-and-shoulders formation in the Euro Index, the 86.4 level in the USD Index could be easily reached this month.

Moreover, the USD Index has broken above the May 2013 highs. In terms of closing prices the high was at 84.35, in terms of intra-day highs - at 84.60. We think that it would take a close below 84.35 or an intraday move below 83.9 to invalidate this breakout. Consequently, for now, even though the situation in the USD Index is overbought on a short-term basis, the short-term trend remains up.

What follows, we might - quite likely - see another powerful factor contributing to lower precious metals prices.

The question is how gold, silver and mining stocks will react. Will they move down only slightly like they did on Friday? Or will they move down violently like they did last month? At this time we still think that the latter is more probable. If we see the USD moving above 85.5 or so without any meaningful reaction in gold, we will very likely suggest going fully long, but for now it doesn't seem that likely.

Finally, there is another technical factor that suggests lower gold prices which would likely take gold to its final low. We are talking about gold priced in Indian rupees - you can read such analysis in today's article by Nadia Simmons. Long-term subscribers will recall that your editor - PR - is not that keen on the Elliot Wave techniques (with exception of the corrective zigzag patterns) but we wrote several times that there are likely some analysts who can make good use of these techniques. In my - PR - opinion, Nadia Simmons and Paul Rejczak, who have recently joined our team, have been applying these techniques effectively. It turns out that currently this approach confirms the points made earlier and based on other approaches which makes the overall picture a bit clearer. On a side note, we would really love to know what you think about the analyses we have published recently, written by Nadia (crude oil essays and the above-mentioned essay) and Paul (pre-market stock commentary, here's today's portion: Stock Market: Optimistic expectations at the beginning of the quarterly earnings releases season). We would like to develop these articles according to your suggestions - please help us serve you better.

Moving back to the precious metals market, it seems that the precious metals market will move lower, but given only a small reaction to the dollar's strength on Friday it seems that being completely out of the market with one's silver investments is too risky at this point. Consequently, we suggest moving back to the long side of the market with 50% of the long-term investment capital.

Long-term capital: Half position in gold, silver, platinum and mining stocks.

As far as long-term mining stock selection is concerned, we suggest using our tools before making purchases: the Golden StockPicker and the Silver StockPicker

Trading capital: No positions. We suggest placing buy orders for the speculative long positions in gold and silver for gold at $1,160 and silver at $17,40. We don't have analogous price levels for mining stocks, but it seems that it will be a good idea to buy them when you buy gold based on the $1,160 target.

After the above-mentioned move higher (rally from $1,150 in gold) we expect metals and miners to decline once again and move to $1,090 (gold), $14,70, and 150 (HUI Index). It seems to us that these levels will be reached this month (July 2013).

These levels could be seen along with USD Index at 86 - 86.4. At that time (if we see another downswing), we will suggest purchasing metals and miners at the following price levels (speculative trades):

• Gold: $1,105 (stop-loss: $970)
• Silver: $15.20 (stop-loss: $14.20)
• $HUI: 155 (stop-loss: 137)

These levels are slightly above the price targets to maximize the odds of entering the trade (if everyone thinks that gold will move to $1090 they will buy before it reaches this level and ultimately gold may not drop as low at all).

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.

As a reminder, Market Alerts are posted before or on each trading day (we usually post them before the opening bell, but we don't promise doing that each day). If there's anything urgent we will send you an additional small alert before posting the main one.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA