We have received several requests to comment on the current situation on the metals market given the fact that the USD Index is now very close to the 80 level, so here we are. In the previous updates/alerts we've referred to this level as being likely to stop the current rise in the U.S. Dollar, so the fact that it has recently moved temporarily above 79.5 might suggests that the next speculative buying opportunity is very close.

The question is, if it is profitable (from the risk/reward perspective) to open speculative positions at this point. Taking PMs, PM stocks, and the USD Index into account - yes. However, the situation on the general stock market is still bearish, and since this is once again an important driver for the PM prices, the situation becomes much more complicated.

Therefore, until we see one of the following:

- the general stock market appears to have bottomed,

- PM prices have disconnected from the general stock market

opening a big long position is going to be risky. The precious metals market, especially PM stocks are oversold at this point, but if main stock indices continue to plunge, precious metals may become even more oversold in the short-term.

Consequently, points made in the previous Premium Update are still up-to-date - in short, we would like to see a confirmation that the plunge in the general stock market is not likely to affect PMs, and we haven't seen that so far. We will keep monitoring the markets, and report to you if our view on the situation changes.

The next Premium Update scheduled for Friday, Feb 5th 2010.

Thank you for using the Premium Service.

Sincerely,
Przemyslaw Radomski