Yesterday we wrote the following about the currency markets:

"The Euro Index corrected half of the October - November decline and then pulled back down once again. The USD Index moved very close to our target level that we mentioned yesterday (80.50, while the USD moved to 80.60). That's close enough for us to assume that the local bottom in the USD Index might be already in."

The Euro Index closed very close to Monday's intra-day high and the USD Index closed slightly lower. Did gold and silver rally as one would expect them to? No, they even closed slightly lower. Miners were basically flat. It seems that we simply saw a pause within a decline and that the precious metals sector remains vulnerable to further declines.

From the non-USD perspective, gold declined once again yesterday.

Stocks declined once again yesterday (only slightly, but still) and the are some non-obvious bearish implications for the precious metals sector. If we consider the past 6 months, there were only 3 cases when stocks declined for 2 consecutive trading days in a similar fashion to what we see right now - similar shapes of daily candlesticks and with sharp rallies preceding the 2-day decline. These were July 23-24, Sep 19-20, and Oct 29-30. It was not the final top for the stock market in all 3 cases, but in all 3 cases we saw a significant decline in the precious metals sector in the following days and weeks. Interestingly, all 3 cases took place in the second half of the month - which is where we are right now.

While the correlation coefficients at this point don't imply any move in the precious metals sector based on the situation on the general stock market, the above analogy does.

The short- and medium-term outlook remains bearish for the precious metals sector.

To summarize:

Trading – PR: Short position in gold, silver, platinum and mining stocks.

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

Stop-loss order details for the speculative (trading) short positions:

• Gold: $1,306
• Silver: $21.10
• HUI Index: 236
• GDX ETF: $25.30

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