On Friday gold and mining stocks rallied. This rally has changed neither the short-term outlook (remains bullish) nor the medium-term one (remains bearish as well). However, based on low volume in miners and a daily decline in silver, it seems that the rally might end sooner than we had originally though.

Gold closed the week above its 50-day moving average, which was also the second consecutive daily close above this level. The volume was not huge, but it was not low either - it was significant enough for us not to view the breakout as a false one.

Silver closed the week slightly above its 50-day moving average as well, which is bullish, but at the same time we don't have a breakout above the medium-term declining resistance line (it was visible on the SLV ETV chart in the latest Premium Update). We saw a move lower after silver reached it.

Mining stocks moved higher, however the move took place on relatively low volume, which indicates that the rally is over or close to being over.

The USD Index moved to its 2013 low on an intra-day basis and then reversed, finally closing at the declining support line. The turning point is upon us and the previous move was clearly down. Given the above, gold might have strength to move only a little higher - until it approaches its next strong (strong on a medium-term basis) resistance level. This resistance is created by a combination of two factors: the 61.8% retracement and the declining resistance line based on the Feb 2013 and Aug 2013 highs. A rally to this level in gold would likely be accompanied by another move to the declining resistance line in the silver market - meaning a likely double-top pattern along with last week's local top.

Consequently, we are adjusting our take-profit levels (we are lowering them; they will be reached as soon as the sector moves just a little higher).

To summarize:

Trading – PR: Half position: long position in 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

Stop-loss orders for the above-mentioned speculative long positions:

• Gold: $1,280
• Silver: $21.30
• HUI Index: 220
• GDX ETF: $24

Take-profit levels (it might be a good idea to close the above-mentioned positions if the following levels are reached):

• Gold: $1,361 (based on the 61.8% retracement and the declining resistance line based on the Feb 2013 and Aug 2013 highs),
• Silver: $22.90
• HUI Index: 248 (remains unchanged)
• GDX ETF: $26.50

As always, we'll keep you - our subscribers - 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) 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