Yesterday was another low-volume day in the precious metals sector. Gold moved a little higher on tiny volume while silver was basically flat and mining stocks declined a little.

Generally, the situation didn't change based on these moves from our point of view. A small move higher on tiny volume in gold is a bearish factor - a one in tune with what we saw in the previous days. Consequently, there's not much that we can say today except for stating that the situation remains as we have described in yesterday's Premium Update. Namely, the next few days are rather unclear, while the following few weeks should bring much lower precious metals prices.

To summarize:

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 are not ruling out the case in which we're going to see a breakout today (which is not likely, even though another small move higher could be seen), 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

We suggest placing buy orders for the speculative long positions in gold and silver for gold at $1,105 and silver at $15.20 (and closing the short position at that time - if these levels are reached). The analogous level for the HUI Index is 155. If gold moves to $1,105 but other markets don’t move to their targets – we suggest closing short positions in gold, silver and mining stocks and going long these sectors anyway. If silver or the HUI reaches the target but gold doesn’t, we suggest closing all the above-mentioned short positions, but going long only the market that has reached its target. In this case you will likely hear from us shortly, but you know what's our take even before that happens.

Entry levels and stop losses for the above rather-soon-to-be-opened long positions:

• 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.

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