Market AlertFebruary 26, 2013, 11:23 AM
The interesting thing about gold's performance yesterday was its ability to move higher along with higher USD Index values. This resulted in a significant move higher in gold priced in the euro. This, however, is a small sample of what we think awaits the gold market in the following months. Today's small decline was immediately followed by a strong pullback, which is a strong bullish signal of short-term nature.
Last week's "breakdown" in the gold:UDN ratio (gold from the non-USD perspective) was clearly invalidated and the medium-term trend remains up.
The general stock market moved significantly lower yesterday, but the move was big only on a short-term basis. At this time it doesn't seem to be anything more than a short-term consolidation which we mentioned as being possible right now. Note that mining stocks didn't decline along with other stocks - they are now tied to gold stronger than to the stock market. The platinum:gold ratio is linked to the performance of the general stock market, so we're not surprised to see some temporary weakness in platinum. Just as we don't think that the decline in stocks will be significant, we don't think that platinum will consolidate for much longer - we expect it to begin outperforming gold once again shortly.
Silver moved higher yesterday - right after its cyclical turning point, and the USD Index hasn't declined yet. When the USD Index turns lower - we expect this to happen any day now, perhaps later today - gold's rally should accelerate. Right now gold is moving higher despite the dollar's strength.
Full speculative long positions are suggested for gold, silver, and mining stocks.
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