Basically, gold and silver closed where they were when we posted / sent out our yesterday's Market Alert, so what we wrote yesterday remains up-to-date. In short, we still think that the medium-term trend in the precious metals sector remains down, but chances for a short-term upswing increased after yesterday's downswing and we think that taking profits off the table yesterday was a good idea.

Yesterday's decline in precious metals and in the stock market (and the rally in the USD Index) is widely attributed to the comments from the Fed - namely, the idea that the central bank could begin to scale back its stimulus program at one of its next few meetings.

We don't believe that. The official figures have not improved significantly and, consequently, we don't expect the Fed to start to taper the QE program anytime soon. Matt Machaj, PhD explains in the most recent Market Overview report:

"Yellen believes in the classical Keynesian framework: spending keeps the economy going. As long as the inflation rate is not running away, we should keep adding more money. If there is no direct inflationary pressure, and the economy is in recession, then spending is too low."

The approach hasn't changed, neither have the official statistics regarding unemployment and inflation - therefore, we don't think that the QE's tapering is near.

Still, such comments were enough to trigger a move that had been likely to happen eventually anyway, based on technical and cyclical factors. In this case, we saw another significant daily move down.

There's one more thing that we would like to add to our yesterday's analysis - the discussion of volume levels in the GLD and SLV ETFs. In both cases, volume accompanying yesterday's downswing was big. Whenever we saw a decline on huge volume, after a big decline, it meant either a small or a bigger correction in the coming days. Naturally, we will provide you with a graphical illustration of this phenomenon in tomorrow's Premium Update.

Meanwhile, based on yesterday's volume in the GLD and SLV ETFs, if we hadn't suggested exiting the short positions before the end of the session yesterday, we would be willing to do it now anyway.

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