Gold, silver and mining stocks moved a bit higher on Friday, so the question is if this daily rally changes anything - and the answer is unclear at this time. The market session was shorter than it's usually the case and we can't be sure if what happened on such a "different" day can be viewed as equally meaningful as if it had happened on a regular trading day.

The breakout above the short-term declining resistance line in gold materialized on extremely low volume (in case of the GLD ETF), which nullifies the bullish implications - one could even speak of bearish ones, as such daily rallies on low volume preceded big downswings in the past few weeks.

Yes, the volume should have been lower than regular as the market session was shorter, but even taking this effect into account (comparing regular and Friday's volume in major ETFs like the SPY), the GLD's volume was still very small.

The USD Index moved temporarily to the previous day's low and then moved back up closing slightly below the previous daily close. The strong negative link between precious metals and the USD Index remained in place. Let's keep in mind that the cyclical turning point in the USD Index is upon us, which means that we are quite likely to see a move higher in the Dollar Index and a move lower in gold, silver, and mining stocks.

The situation is tense based on long- and medium-term support lines being in play right now, as we described in our latest Premium Update, but overall it does seem that the bearish outlook prevails for the precious metals sector.

The move higher in mining stocks that we saw on Friday (please note that the GDX rose by 2.15%, but only 0.8% was seen between the opening of the session and the moment it closed) took miners above their previous 2013 low, but in case of the GDX ETF, the closing price is just a few cents above that low ($22.22 vs. $22.28). Consequently, it's not clear if we have indeed seen an invalidation of the breakdown below the previous 2013 lows, especially when we take into account that the market session was shorter and thus might have not been really meaningful.

Consequently, we think that keeping a small speculative short position in the sector (meaning a small short position in mining stocks) is still a good idea.

To summarize:

Trading – PR: No position in gold and silver. Small (half of the regular position) short position in 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 orders for the speculative short position:

• HUI Index: 214
• GDX ETF: $22.80

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