On Friday, the situation basically, once again, developed as we had expected it to. We saw an insignificant daily rally in the prices of precious metals and mining stocks along with a small move lower in the USD Index. The head and shoulders formation was completed in the case of mining stocks, but not in gold. On a short-term basis, miners used to lead gold so, overall, the existence of these 2 formations has bearish implications, even though the one in gold is still underway. Friday's upswing materialized on insignificant volume, which is a bearish sign.

So, are we shorting gold now? No, because other factors suggest an additional rally in the short term. Precious metals could move higher if the USD Index declines and/or if the general stock market moves lower - and both moves are quite likely. The USD Index hasn't been that important recently as precious metals have declined along with the US currency (and the short-term correlation is actually positive), but a more visible (on a short-term basis) decline in the stock market could indeed trigger a rally in metals and miners.

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 October, 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