Gold is declining today while miners failed to move lower and since this might appear bullish we decided to let you know our thoughts even without waiting for the markets to close.

Generally, this appears to be a temporary and not really meaningful factor, because:

1. The GDX:GLD ratio (miners relative to gold) has been actually rising for a few weeks now meaning that miners' outperformance relative to gold is not a new factor. The medium-term situation didn't improve based on that as the ratio is in a medium-term downtrend. In fact, the ratio has just hit both: a combination of 2 resistance lines and a 50-day moving average. The RSI indicator based on this ratio also moved very close to the 70 level in the last few days, so we might be looking at a top here - in the ratio and in miners.

2. The bullish situation in the USD Index didn't really change recently. In fact, USD Index moved lower this week and that was not accompanied by higher precious metals prices. Conversely, lower PM values were seen. This is a bearish indication. At this time it seems that gold simply reacted in a more profound way to the changes in the USD Index and this action - as a temporary (so far) event - doesn't make us believe that higher precious metals prices are to be expected from here.

Summing up, the situation didn't change since we posted our latest Premium Update (it remain bearish in the medium term, especially for the mining stocks), so we will end this message by quoting the summary of the latest Premium Update: "Target levels and probabilities remain unchanged from two weeks ago: $1,350 and $1,200 for gold, $21 and $15 for silver, and 300 and 160 for the HUI Index. The latter corresponds approximately to $31 and $17 for the GDX ETF. We continue to view the probability for a move in gold below $1,500 (that would correspond to major declines in silver and miners) at 75%." We continue to believe that being partially out of the precious metals market with one's long-term investment capital and betting on lower mining stock values with part of one's speculative capital are good ideas.

We will comment on this situation in greater details in the following Premium Update (scheduled for Friday, Aug 17, 2012).

Thank you.

Sincerely,
Przemyslaw Radomski