Here's a quick update on the precious metals market. Actually, we started to write this message before gold declined $10 today, so we will first describe today's situation based on yesterday's price moves and then we will move to today's developments.
So far, the situation is developing more or less in tune with what we described in the latest Premium Update - precious metals have not plunged yet - they are still trading sideways, perhaps preparing to move up, just like the SP Short-term Gold Stock Bottom Indicator suggested.
Prices of precious metals appeared to have begun the plunge yesterday, but gold didn't move below $1,760 (that we mentioned as being the critical one at this time) and miners moved lower very modestly. The very interesting phenomenon was the very low volume that accompanied these downswings.
Was the volume really low? Yesterday was the Columbus Day, which could explain exceptionally low volume, however if we compared yesterday's volume in the SPY ETF to the previous days and we did the same comparison for GLD, SLV, and GDX, we would see that while the volume in the general stock market was low, the volume in the precious metals market was exceptionally low. In other words, the Columbus Day was most likely responsible for only part (half?) of the difference between normal volume and what we saw on Monday. This means that if there was no Columbus Day yesterday, the volume would still be relatively low.
Therefore, since the decline formed on low volume, it likely didn't mark the true beginning of the bigger (to/below $1,760 in gold) decline and some sort of rally could still be seen.
Moving on to today's developments, despite the decline, the above is still up-to-date. Gold didn't move below $1,760 so the stop loss for the long position was not triggered. The shorting order was not triggered as well. The USD Index moved to the 80 level, which proved to be support and resistance on multiple occasions in the past, so it would not surprise us to see the USD move slightly lower from here before the rally continues.
Quoting the latest Premium Update with regard to the average performance of miners after the signal from the SP Short-Term Gold Stock Bottom Indicator was seen:
"As you can see the price may move temporarily lower (which could be what we saw earlier today) but that it is likely to rally soon anyway. This is caused by the fact that this particular indicator used to be early in predicting a bottom in many cases in the past."
All in all, the situation is still quite in tune with what we described in the latest Premium Update even though the prices are a bit lower (miners declined very modestly). The speculative long position suggested by one of the SP Indicators is still open. The long-term capital remains invested in the market.
As always, we'll keep you updated should our views on the market change - even if it means sending another message in several minutes (for instance if gold breaks below $1,760). Thank you.
Sincerely,
Przemyslaw Radomski
