Based on yesterdays price/volume action, we conclude that the situation on the precious metals market is now short-term bullish. The upswing in price was accompanied by relatively high volume levels, which is particularly important here. By "relatively" here, we mean that it was not huge in absolute terms (comparing to the average volume in the past month or so).

Mining stocks (GDX ETF) - Tuesday's upswing and the one seen on Thursday both materialized on volume that was higher than the one seen in the daily downswings before them. Namely, volume on Dec 21st and Dec 22nd was lower than on Dec 23rd, and it was lower on Dec 27th than it was on Dec 28th.

Silver (SLV ETF) - volume was biggest in almost 2 weeks

Gold (GLD ETF) - volume was bigger than during the previous 2-day decline.

Still, given that this is the end of the year and many people take a break from trading, signals coming from the analysis of volume should be adjusted. Namely, if it wasn't the end of the year, the volume would likely be higher. This situation is a substantial obstacle when looking for low volume, because one doesn't know if it is "normal" or "extraordinary" that the volume is low. However, if we're looking at above-average volume in a time when we would expect the volume to be low, we can view it as high, even though it is not the case in absolute terms. Consequently, the current volume levels appear to confirm the bullish case.

Additionally, gold and silver managed to move above their resistance levels on Tuesday.

As we've mentioned in yesterday's message to you, there are several mixed signals on the market, however with resistance levels being taken out on significant volume, the former are of less importance. Moreover, the seasonal patterns suggest a strong move up rather sooner than later.

Summing up, it seems that opening a small speculative long position in gold, silver and mining stocks is appropriate at this moment. We will be looking for a confirmation of the bullish case and let you know if we believe it's a good idea to add to your positions.

As always, we will keep you updated, should anything change.

The next Premium Update is going to be posted tomorrow.

Thank you for using the Premium Service.

Sincerely, Przemyslaw Radomski