At the first sight not much happened in the precious metals market yesterday. The truth, however, is far from that. The HUI:gold ratio declined sharply yesterday and moved visibly below its 2013 lows. In other words, we saw a major breakdown in this important ratio. It seems that the ratio is on its way to the 2000 low at 0.133, and this indicates that the next big move down in the precious metals sector will begin relatively soon. The breakdown hasn't been verified yet, so the implications are not clearly bearish, but still, if gold stocks and gold do nothing in the next 2 days, the situation will visibly deteriorate when the breakdown is confirmed.

The general stock market declined yesterday, below the rising medium-term support line. At this time it seems that we could see further declines. Metals' and miners' reaction to this decline is particularly interesting. Basically, gold and silver didn't do much, while miners plunged. That's a bearish indication for the medium term (for the metals market).

The financial stocks didn't move below their 2011 high - there was no invalidation of the breakout, so from this perspective, the medium-term outlook remains bullish, but still, based on the S&P 500 Index alone and the above-mentioned breakdown, we could see lower stock values at least temporarily.

Silver and the SLV ETF are still above their 20-day moving averages, which is a bullish sign, but at the same time remain below the declining resistance lines created by August and mid-September highs.

All in all, while the short-term outlook didn't change much, the medium-term picture deteriorated based on the breakdown in the gold-stocks-to-gold ratio. We have once more indication that being partly out of the market with one's long-term investment capital was and still is a good idea. The situation remains too unclear from the short-term point of view to open any speculative positions in our view.

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