Last week we saw several interesting technical developments in the precious metals market.

Gold moved to the declining resistance line (based on the Oct. 30 and Nov. 7 highs) on Friday. This suggests that the next move might be to the downside, however, the invalidation of the breakdown below the medium-term rising support line is still in play and it seems to be a stronger factor than the declining resistance line.

The breakdown in silver was confirmed as silver closed below the 61.8% Fibonacci retracement level based on the June-August rally ($20.80) for the third consecutive trading day. This makes the situation more bearish, but not to a great extent because this signal is not confirmed by what is going on in the gold market and with mining stocks.

Miners declined on Friday despite gold's small move up and a move up in the main stock indices, which is another bearish indication for the precious metals sector.

Palladium invalidated its previous breakout above the declining resistance line based on the March/April and June highs. Yet another bearish sign for the coming weeks.

Meanwhile, basically nothing changed in the currency markets on Friday - we saw a move to the last week's high in the Euro Index and a move to the last week's low in the USD Index.

Do you recall the cyclical turning point in late October after which the USD soared and gold declined? The next cyclical turning point for the USD Index is about a week away and the most recent move has been down (due to last week's corrective downswing). Given the current pace of the decline, we could expect the USD to move just a little lower before bottoming - to 80.5, or so. Then again, even a move to 80 wouldn't invalidate the breakout above the declining short-term support line (based on the July and September tops).

As you can see the above points do not align to form to one coherent suggestion. However, investors and traders have to make a decision each day, as even keeping everything as it is, is also a decision. In this case, we have decided to take a step back, zoom out, and look at the very basic thing - the price of gold.

When taking a look at the weekly gold price candlesticks, we can see one very characteristic thing - a weekly reversal. Gold started the week at $1,288.30, declined to $1,260.50 and then moved back up to $1,289.60. In the past 5 years, such weekly reversals have almost always stopped declines at least for a while and in the majority of cases were followed by at least short-term rallies.

Consequently, while the medium-term trend remains down, it seems that some short-term strength is quite likely. Consequently, we don't suggest re-entering the short positions just yet, nor do we suggest opening long ones, as there doesn't seem to be much short-term upside in the coming rally. As always, it's not a certain outcome, but something that seems likely based on the data that we have right now.

To summarize:

Trading – PR: No positions.

Long-term investments: 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 - 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