The precious metals market opened a bit lower today and gold, silver and mining stocks are more or less where they opened on Friday. If you look at the GLD chart, it might appear to you that gold is close to its Friday intraday low. However, that is not the case, because the true low was formed before the markets opened on Friday, which was also the reason for which we sent 2 Market Alerts even before the markets opened on that day.

The GLD prices don't take the pre-market moves into account simply because the GLD ETF was not trading at that time.

The reason why we emphasize this is that if you examine spot gold, you'll see that gold is still much above its Friday low. The same can be said about silver - even to a bigger (and more bullish) extent. Silver is more or less where it closed on Friday, not where it opened, so the relative performance is better than it is in case of gold.

As far as gold from the euro perspective is concerned (the one that we emphasized as crucial) we saw no true breakdown on Friday even though gold moved temporarily below the rising support line before the markets opened in the US. Interestingly, the MACD indicator based on the $gold:$xeu ratio (gold priced in euros) flashed a buy signal while being heavily oversold, and 6 out of 7 times we saw this signal in the last 3 years (Aug 2010, Feb 2011, Oct 2011, Jan 2012, Apr 2012, May 2012, November 2012), substantial rallies followed - also from the USD perspective (spot gold).

The Euro Index closed the previous week at the 38.2% Fibonacci retracement level (based on the Nov - Dec, 2012 rally) and the trend remains up.

At the moment of writing these words, the USD Index is at the 80.28 level, which means that it's back below the declining support line, which it "broke" last week. As you read in Friday's Premium Update, we had been expecting this breakout to be invalidated and it just was. This event has bullish implications for the precious metals market for the following weeks.

Just as we indicated on Friday, at this time half of the long position is suggested for gold and silver and a full long position is suggested for mining stocks.

We will probably see a buy signal from our indicators shortly, which will make us suggest doubling the long position in gold and silver, but that's not yet the case.

Naturally, we suggest remaining in the precious metals market with your long-term investments.

As always, we'll keep you updated should our views on the market change. We will continue to send out Market Alerts on a daily basis (except when Premium Updates are posted) at least until the end of January, 2013 and we will send additional Market Alerts whenever appropriate.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA