Metals haven't been doing much today, so we would like to take this opportunity to draw your attention to what happened in the past 3 weeks. Simply put, the current rally in gold and silver is a stealth one. Metals take two small steps forward and then one small step back. On a day-to-day basis it's nothing to be excited about - like today's session so far.
But, the fact is that it was less than 3 weeks ago when silver bottomed at $29.24 before the markets opened in the US. At the moment of writing these words, silver is at $32.35 - more than $3 higher. That's more than $1 per week on average. Even though you may not feel silver's rally based on the day-to-day price swings, it is actually rallying strongly.
On the same day - Jan 4, 2013 gold moved to $1,626. It's over $1,690 now. Not exciting on a day-to-day basis, but nonetheless it's moving higher.
At the end of the day, your wallet/brokerage account will not reflect the excitement or lack thereof (unless you buy at the top and sell at the bottom) - it will show values that are based on pure buy and sell prices and prudent portfolio management.
The USD Index is right at the declining resistance line and it's at its cyclical turning point which is a bearish combination for the currency and a bullish one for the precious metals sector. If the USD Index declines here - and that seems likely - the small head-and-shoulders pattern will likely be completed. This would have bearish implications for the dollar and could make it complete the long-term head-and-shoulders pattern, which would have even more bearish consequences. This likely-to-be-seen snowball effect will - if seen - have very bullish implications for gold, silver, platinum, and mining stocks. We expect the rally to accelerate in the coming weeks.
Miners are not yet moving higher, which in our view reflects the poor sentiment among precious metals investors. Powerful rallies start when the sentiment is low, because these are the times when there is a lot of people that know the market but are not yet in it and are ready to buy as soon as they see the price going higher. While this doesn't imply that a rally is likely to be seen, it does, however, suggest that patience should be well rewarded if the next big move in the sector is to the upside - and we believe this is precisely the case.
We remain bullish on the precious metals sector and, just as we indicated previously, half of the long position is suggested for gold and silver and a full long position is suggested for mining stocks.
Naturally, we suggest remaining in the precious metals market with your long-term investments.
As you recall from yesterday's Market Alert, we have recently expanded the Dictionary section on our website and now it includes related terms and dialogs that can help understand what a given terms means for gold and silver investors. Here are three more terms for you to look at:
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 February, 2013 and we will send additional Market Alerts whenever appropriate. That's right, we decided to keep sending you daily Market Alerts at least until the end of the next month based on the very positive feedback that these daily alerts have generated.
Thank you.
Sincerely,
Przemyslaw Radomski, CFA
