Gold and silver rallied strongly today (the volume is already significant) and mining stocks rallied less visibly. Even though the moves have been very visible, and you might be considering cashing in the quick profits, we suggest otherwise. We believe that most of the rally is still ahead of us and that getting out here would be premature. 

As mentioned above, mining stocks have not rallied as significantly today as metals have, and at this point you might be wondering if this is a bad sign. We don't think so, because miners' outperformance was so significant in the previous weeks that a pause in miners:gold ratio is not something extraordinary. At this point miners (GDX ETF) are slightly above their 38.2% Fibonacci retracement level (based on the July - September rally) and so is gold (GLD ETF). There is no true underperformance here so far and we expect not to see it in the following weeks. 

What are the gold and silver telling us about the outcome of the US Presidential Elections? That Obama will win. It's not a sure bet, but it's something that markets seem to believe. This page http://www.intrade.com/v4/markets/contract/?contractId=743474 also tells you that the market believes in Obama's victory (about 70% chance). This is inflationary piece of news and a bullish one for the precious metals sector.

We suggest holding the speculative long positions in gold, silver and mining stocks and also holding your long-term precious metals investments intact. 

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.

Sincerely,
Przemyslaw Radomski, CFA