The volume seen on the precious metals market was exceptionally tiny yesterday. If you've been following our analysis for some time, you know that whenever we spot something unusual about the market, we quickly start looking for any relevant (!) patterns that might be in play. This time is no different and we examined the market looking for days in the not-too-distant past when gold either simply traded on very low volume or when it rallied on very low volume. The more similar the days with the same situation (in this case - with very low volume), the more probable that the following price patterns will also repeat.

The previous time that we saw a volume that low in the GLD ETF was on June 14 and June 17 - right before the big drop.

Before the above, we saw a volume that low on April 1 - again, right before the declines started.

Before the above, March 13 - a small rally followed (this situation is a bit less similar than two above as in this case the day on extremely low volume was preceded by a decline)

Before the above, December 24, 2012 - a small rally followed (however, in this case the small volume can be explained by people taking time off for Holidays, and is not really analogous)

Before the above, December 10, 2012 - a decline followed.

Before the above, November 21, 2012 - one daily rally followed immediately, but gold declined right after that day.

Basically, all of the more similar cases, when the volume was so tiny, were followed by declines.

The above can be said about the SLV ETF to a considerable extent as well. We don't have this analogy visible in a clear way for mining stocks as they have been trading on increased volume in the past few weeks, but compared to these volume levels, yesterday's volume was indeed small.

In other news, if you take a look at the gold price from the British pound perspective, you will notice that the declining resistance line (based on April and May highs) was reached yesterday.

Overall, the outlook remains bearish for the precious metals market in our view.

We are not ruling out the case in which we're going to see a breakout today, and in this case the short position would have to be closed. Consequently, we suggest placing the following stop-loss orders:

• Stop loss for gold's speculative short position: $1,340
• Stop loss for silver's speculative short position: $20.90
• Stop loss for the HUI Index's speculative short position (theoretically, as you can't short the index by itself): 246
• Stop loss for GDX ETF's speculative short position: $26.55

To summarize:

(Before we start, if you don't have any positions opened, we think that it might be a good idea to open them now.)

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: Short positions (half) in gold, silver and mining stocks. We suggest placing buy orders for the speculative long positions in gold and silver for gold at $1,140 and silver at $17,40 (and closing the short position at that time - if these levels are reached). We don't have analogous price levels for mining stocks, but it seems that it will be a good idea to buy them (close the short position) when you buy gold based on the $1,140 target.

After the above-mentioned move higher (rally from $1,140 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 could be reached this month (July 2013).

If we don't see a sharp plunge to $1,140 in gold then we plan to hold the short positions until the final bottom near the $1,100 level. That is unless something makes us change our mind meanwhile - and you - our subscribers - would be the first to know in this case.

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.

On an administrative note, this week's Premium Update will be posted one day ahead of the regular schedule - on Thursday, July 18.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA