The precious metals market didn't do much yesterday - we saw a move lower initially, which was followed by a pullback.

Silver moved slightly below its 2008 high but then moved back up once again. Please note that silver moved up right after the cyclical turning point (and comments from the Fed, which were an important indicator, but perhaps the proximity of the turning point was what made this upswing so significant) and consequently, this turning point no longer has bullish implications. What was likely to happen based on it - has already happened.

The move below the neck level of the bearish head-and-shoulders formation is now a fact in case of the mining stocks (both the GDX ETF and the HUI Index) and the implications are bearish. There has been no analogous breakdown in case of gold, so this formation is not confirmed by the yellow metal. It is a bearish indication, though. Miners could be leading gold lower here - once again.

Meanwhile, the general stock market (S&P 500) stayed below the August high for the second day. One more day below the high and we will view the breakout as invalidated with bearish implications for the short term.

The outlook for the USD Index is particularly interesting and somewhat similar to what we see in the silver market. There are cyclical turning points in both cases and just like it is the case for silver, the turning point for the USD Index might have already had the effect it was supposed to have. A decline in the USD Index might be seen (no guarantees though) and it would be very much welcome as precious metals' reaction to such a decline would quite likely serve as a final shorting confirmation.

Gold is once again strongly underperforming the USD Index. Comparing the recent performance of the stock market, USD Index and the precious metals sector reveals some important implications for the medium term. Please note that the no-tapering news from the Fed surprised the markets and moved them considerably. But what's the status now, after there's been some time for the hype to fade and for the investors to cool down? The USD Index is still low, stocks are still high, but gold, silver and mining stocks have more or less moved back to where they were before the news. This is a very bearish sign for the medium term as it shows great weakness in the precious metals market. Simply put, the surprising comments that came from the Fed provided us with the possibility to confirm our assumptions about the medium-term trend and to reassure us that staying partly out of the precious metals market with our long-term capital is a good idea. In fact, we are even considering moving completely out once again (we are not suggesting it just yet, though).

To summarize:

Trading – PR: No positions.

Long-term investments: A 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

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