Two things that we would like to comment on in the message are elections in Greece and France. 

CNN reports the following:

"(...) New Democracy - part of the present ruling coalition - finished first with 19% support to capture 109 seats. That figure is barely half the percentage that it won in elections in 2009 (…). No party is likely to have anything approaching a majority, leaving the politically and economically volatile nation even more in flux. (...) Politicians have until May 17 to come up with a new working alliance or, if they cannot, set a date for another round of elections."

The bottom line is that nothing really improved - the only change there is, is that making decisions and introducing additional reforms has now become even harder. Naturally, this is not a positive piece of news for the European economy.

CNN also reports the following:

"Europe was plunged into fresh economic chaos last night as France rejected austerity and elected a tax-and-spend socialist president."

Socialistic approach usually leads to a lot of spending and decisions that don't favor the growth of the economy. What is often seen is a lot of talk about programs (financed from taxes or similar means) that are supposed to boost the economy, but in the end the history shows that the growth is bigger when such programs are not introduced.

CNN further reports:

"The inexperienced Mr Hollande is now seeking talks with the European Central Bank and German Chancellor Angela Merkel to demand further borrowing to boost growth."

The above reflects our previous comments - there will likely be more redistribution of wealth and the consequences are not favorable for the economy nor for the markets. There will also likely be bigger pressure on printing money - which actually also is a form of redistribution of wealth - monetary authorities take wealth from the holders of the currency (through inflation) and give it to someone else. 

The above is not a good sign for the euro which makes it a good sign for the USD Index. The question is if this information was already "in the price" or not - likely yes, because the above outcomes were quite likely. Therefore, it doesn't change the overall picture for the currency markets, even though the USD Index rallied to 80 earlier today. 

USD moved immediately lower after touching the 80 level, so there was no real breakout above the declining resistance line that we have drawn on the short-term USD Index chart in the latest Premium Update:

http://sunshineprofits.com/premium_commentary/04-may-2

The breakdown below the lower support line has been invalidated and invalidation of a breakdown is generally a bullish sign. However, the rally that this would have generated can be already over at this point.

What is particularly interesting is that precious metals did not really decline when the dollar rose today, which is a positive short-term sign.

The bottom line is that the outcome of the abovementioned elections improved the fundamental picture for precious metals and the short-term gold-usd reaction is a positive short-term factor. Consequently, the situation in the precious metals market remains bullish for short- and long term and we believe that betting on higher precious metals prices is a good idea from both: short- and long-term point of view.

As always, we'll keep you updated should our views on the market change - even if it means sending another message in several minutes.

 Thank you.