Gold, silver and mining stocks moved very close to the resistance levels that we've mentioned previously, so at this point you might be wondering if it's a good moment to exit your long positions and take profits off the table.

It is certainly true that the precious metals sector moved higher recently and we understand that those of you, who took advantage of the Jan 25th Update and the following Feb 3rd Alert, are now anxious because profits on the current position have caused its size to increase. However, it seems that exiting these positions today might still not be the best way to approach the market. Please note that besides mentioning target levels, we also wrote about waiting for a confirmation that the top is in before exiting the speculative long positions. This is something that we have not seen in the recent days.

The volume in gold, silver and GDX ETF (proxy for mining stocks) is not low enough to suggest that the buying power is drying up, and it's not too high either to confirm that Wednesday's intra-day action can be viewed as a topping doji candlestick for the GLD ETF. There was no meaningful divergence between performance of different parts of the precious metals sector (including juniors), and there are no significant bearish signals neither for the USD Index nor for the main stock indices. Moreover, we did not see a spike in volume in the GDX:SPY ratio, which is often the case right before or at the top.

Summing up, the odds of a continuation of the rally above the previously mentioned target levels are simply too big for us to suggest closing the speculative long positions, especially that we have not seen a confirmation that the top is in. In other words, we suggest keeping the speculative positions open. As always, we will keep you updated, should anything change.

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Sincerely,
Przemyslaw Radomski