Friday was another up-day for the precious metals sector.

The GLD ETF moved higher, once again reaching the declining resistance line without breaking it. It moved higher on relatively low volume. Please note that even if gold moves higher, to the higher of the declining resistance lines, the outlook will remain bearish unless we see a confirmed breakout. The above-mentioned resistance line is currently about $20 above Friday's closing price in case of gold, so a move up of this size that we saw today in the pre-market trading, should not make you worried about the current short positions as it would not change the outlook in our view. Please keep our stop-loss levels in mind when estimating whether a rally to a certain price level changes the outlook in our view or not ($1,340 in case of gold).

The SLV ETF was up just a little (less than 1%) on very small volume. Silver is once again at the declining resistance line an a few cents above its 20-day moving average (not much of a breakout, definitely not a confirmed one). The outlook remains bearish. Actually, the situation here is also similar to what we saw at the beginning of June. Silver was at its previous cyclical turning point and very close to its 20-day moving average before it began its $5 decline.

Miners moved higher on volume that can be viewed as average or low, depending on what one compares it to. Compared to the average volume over the past several months, the size of Friday's volume is neither big nor small. However, comparing it to Wednesday's decline and Tuesday's rally, we see that the volume was relatively low, and we think that this interpretation is more meaningful (comparison to the more recent data).

It seems that the situation is similar to what we saw in early June. Miners moved slightly above the previous high on relatively low volume. After a few days of trading sideways, the declines were seen once again and a week later a powerful downswing materialized.

The USD Index is now practically at its cyclical turning point with the most recent visible move being to the downside - we are likely to see a rally shortly. The implications for the precious metals market are bearish.

Generally, the situation didn't change based on the above 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, the situation remains as we described it in Thursday'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