The entire precious metals sector declined significantly yesterday. What's most important, gold, silver and mining stocks declined on significant volume. In case of the mining stocks, it was a decline after the completion of the H&S formation, and in case of gold, we saw a completion of the H&S formation today. The significant volume during yesterday's decline suggests that the decline was no accident and that it represents the true direction in which the market is heading.
From the long-term point of view, and taking silver into account, we can say that it looks like silver is diving - to bottom at the next long-term cyclical turning point - close to the end of this year. If so - and remembering that silver is more volatile than gold - we could definitely see a big decline in the coming weeks and months.
Gold is now definitely underperforming the USD Index - this is even more visible than one might infer based on the True Seasonal tendencies. Gold just proved that it can decline significantly without a signal from the USD Index - and this is a bearish fact, because when such a signal is indeed seen, gold will likely plunge more significantly.
Overall, we think that the short positions are justified. However, the True Seasonal tendencies still suggest a pullback in a week or so, and consequently we don't think that adjusting your long-term investment positions or adding to your short-term speculative positions is justified at this time. We might suggest such adjustments if we see another bearish confirmation in the following days, for example in the form of a correction on very low volume.
To summarize:
Trading – PR: Short position (half): gold, silver and mining stocks.
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
- Gold: $1,320
- Silver: $21.50
- HUI Index: 235
- GDX ETF: $25.5
On an administrative note, this week's Premium Update will be posted 1 day ahead of regular schedule, on Thursday, Oct 3, and there will be no Market Alert on Friday, Oct 4, due to the annual meeting of the Sunshine Profits Team which will start on that day. If you have any comments, suggestions, requests regarding anything that we are doing, please let us know - that's the perfect time for it, as we will immediately discuss it.
Also, we have just posted our latest Market Overview report titled "The Dollar System and Possible Tapering" in which we discuss when the tapering is likely to take place, what part of the Fed's minutes is crucial, the shocking link between Fed's assets and the stock market prices. If you're interested, you can sign up here.
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
