Precious metals and mining stocks declined heavily yesterday and the short positions that you had (hopefully) entered based on Friday's Premium Update are already profitable. The HUI Index closed below 200 and the move was significant enough to confirm the breakdown below the previous 2013 low even without 3 consecutive closes on trading days. The volume on the GDX ETF was also significant. It looks like the HUI Index is on its way to our target level: 150.

Gold priced in the euro moved slightly below its previous 2013 low, while gold priced in the British pound declined after verifying the breakdown below an analogous support. On average - taking the non-USD perspective into account - we saw a breakdown below the rising medium-term support line, which has bearish implications for the coming weeks.

Gold priced in the USD invalidated the breakout above the declining resistance line and it closed visibly below the declining support line based on the August and October lows. Most importantly, gold moved below the long-term support line based on the 2008 and 2013 lows - that's the most significant factor to be considered at this time.

Consequently, even though gold still remains above the declining support line based on the August and September highs, the outlook seems bearish.

Silver moved below the rising long-term support lines. The next strong support is slightly above the $18 level and further down is our final target for the current medium-term decline: the $16 level.

The Dow-to-gold ratio moved higher once again and it looks like waiting for a correction is not a good idea right now - being at 13.14 the ratio moved significantly above the 12.50 level, which it had previously broken and the breakout seems to be confirmed based on that.

Just as the USD Index haven't moved much higher just yet, we don't think that the decline in the metals & miners is over.

As far as the general stock market is concerned, we once again saw 2 days when stocks declined, which, as we discussed in the latest Premium Update, has recently meant that a decline is to follow in the precious metals sector. This is another bearish factor.

Consequently, at this time, we suggest doubling the short position in mining stocks and opening it in case of gold and silver, and we suggest closing the long-term investment position in case of mining stocks. Again, we don't suggest hedging / selling your long-term precious metals investments completely - only mining stocks.

To summarize:

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

Long-term investments: Half position in gold, silver, and platinum. No position in mining stocks.

Stop-loss orders for the speculative short position:

• Gold: $1,262
• Silver: $19.80
• 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