Gold has declined recently and it seems that what we wrote about it previously remains up-to-date - namely, the outlook is bearish and we might have seen the final top for the July-August correction. The volume doesn't confirm the decline so far, but based on the long-term resistance line and the 38.2% Fibonacci retracement level (based on the 2011 - 2013 decline) being reached, it seems that the local top is in.

Palladium has moved below the declining resistance level, thus invalidating the breakout, which is another bearish factor.

Silver moved sharply lower in the final days of the previous week, as we expected it to, but it has also moved up by $0.60 today, even though gold has declined $4, which makes the silver market particularly difficult to trade (it's difficult to place reasonable stop-loss orders given this kind of intra-day volatility). Consequently, as far as the silver market is concerned, we will wait for an additional confirmation that the top is in before going short.

Still, if you take a look at the weekly candlestick, you will see a significant reversal pattern that materialized after silver corrected 38.2% of the preceding decline - just like it was the case in 2008 before the white metal plunged.

Mining stocks didn't decline significantly at the end of the previous week, but they strongly underperformed metals in its first part, so overall the sector is once again underperforming on a short-term basis, which is a bearish sign. As we mentioned previously, the HUI:gold ratio simply verified the breakdown below the 2008 low and now the downtrend seems to continue.

The USD Index rallied last week, as we expected it to. The move is in tune with what was and still is likely to happen after a cyclical turninig point and after the move to the medium-term support line. It seems that the rally will continue.

At the same time, the situation in the stock market remains bullish as the medium-term support line was not broken.

To summarize:

Long-term capital: Half position in gold, silver, platinum and mining stocks.

Trading capital: Short position: gold (half), and mining stocks (full) with the following stop-loss orders:

• Gold: $1,439
• HUI: 289
• GDX ETF: $32.6

Naturally, the "full" position doesn't mean using your entire speculative capital for a transaction. It means using the "full" size of the suggested one - you will find more information along with some hints on how big it should be (it's not investment advice, though) in our gold portfolio report (check out the images at the bottom of the report).

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 and except the period between Sep 5 and Sep 13) at least until the end of September, 2013 and we will send additional Market Alerts whenever appropriate.

As a reminder, Market Alerts are posted before or on each trading day (we usually post them before the opening bell, but we don't promise doing that each day). If there's anything urgent, we will send you an additional small alert before posting the main one.

Thank you.

Sincerely,
Przemyslaw Radomski, CFA