The Fed surprised the markets (with the exception of those that read this month's Market Overview) with the no-tapering decision and stocks rallied along with the precious metals sector. The USD Index declined (below the medium-term support line) and the Euro Index rallied. The S&P 500 Index moved above its previous highs.

Let's start with a quick summary of our current views. We continue to view the rally as a temporary phenomenon within a medium-term decline that is likely to take gold to $1,100 or so. However, at the same time, based on the size of yesterday's rally, corresponding volume and the fact that markets were surprised by the Fed's announcement (and given the current True Seasonal tendencies), we might get a bigger temporary rally than it was likely before Fed's announcement, and we think that keeping a short position in this case is no longer justified from the risk/reward perspective.

Consequently, we suggest taking profits off the table, closing the speculative positions and waiting for another opportunity to reopen them - which will quite likely be seen shortly (we'll keep you informed).

How high can gold go? It's very unclear at the moment - between $1,375 and $1,440 based on various techniques. That's why we are not suggesting opening speculative long positions here - it could be just a $10 move up, which we'll see before markets open and a decline could follow. We could see a sharp rally higher too - but betting on it seems too risky because of the previous possibility.

The situation in the USD Index adds even more uncertainty. The Dollar Index declined strongly on Wednesday and it moved below the medium-term support line. The move was not verified just yet, so it's only somewhat bearish. At the same time, however, the USD Index declined exactly at its cyclical turning point, which makes it very likely that the Dollar Index will rally shortly, perhaps invalidating the breakdown and generating another bullish signal in this way. Of course such a bullish invalidation would very likely have a bearish impact on gold, silver, and mining stocks.

We will provide you with more details, charts and explanations in tomorrow's Premium Update - based on what happened this week it seems that it will be one of the most interesting and important Updates of this year.

To summarize:

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

Trading capital: No positions.

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 September, 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