Market AlertFebruary 19, 2013, 10:57 AM
In today's Market Alert we would like to draw your attention to the fact that gold priced in euro moved to the May 2012 low on Friday. We previously wrote that the ratio "could move a bit lower (to the 12 level) before it bottoms". The ratio moved below 12 on an intraday basis and closed the week at 12.06.
Gold priced in the Japanese yen moved lower on Friday as well and it stopped at the level of the 2011 high. This is a verification of a breakout at this time, nothing more.
When taking a look at the non-USD gold price (gold:UDN ratio), we see that the ratio moved temporarily below the declining support line but closed the week slightly above it. The situation here remains bullish.
Silver closed the week below the long-term rising support line, but as we mentioned on Friday - the move is relatively small compared to the whole support line and we saw only one weekly close below it - therefore, the breakdown is not yet verified and the picture did not turn bearish.
In Friday's Premium Update, we featured the GDXJ:SPY ratio (junior-mining-stocks to the general stock market ratio) and wrote that a spike high had been seen shortly before in the ratio of volumes between these ETFs. These spike highs in the ratio of volumes heralded local bottoms many times in the past. On Friday, during the spike, the ratio of volumes hit an all-time high, so the buy signal here is very strong.
The HUI Index is very close to the May 2012 low - this might be the time when miners bottom along with gold at $1,590 and silver slightly above the $29 level. We still think that watching gold for the best moment to double the long speculative in silver and mining stocks is the way to go. Only half of the speculative long position is suggested for gold, silver and mining stocks at this time.
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 March, 2013 and we will send additional Market Alerts whenever appropriate. In other words, we have decided to keep you informed on a daily basis for another full month.
Przemyslaw Radomski, CFA