Based on the Friday's price action alone not much changed even though gold moved higher. It's still overbought, still negatively correlated with stocks which are still more likely than not to move higher in the following weeks. However, there was one thing that changed. We have just seen a long-term buy signal from our SP Gold Bottom Indicator. While this doesn't make the picture bullish, it invalidates the very bearish outlook that we described recently.

You will find this indicator in the Premium Charts section on the website, and here's a direct link:

http://sunshineprofits.com/files/indicators/indic_lt_gold_bottom.png

The two previous times when we've seen a buy signal (signal line crosses the horizontal dashed line at the bottom of the chart) from this indicator are: 6/29/2011 (close to $1,500, a few days before a major bottom) and 1/24/2011 (below $1,350, a few days before a major bottom).

In the latest Premium Update we have mentioned that we approximately estimate the probability of a downswing's continuation to 65%. Right now - given the SP Gold Bottom Indicator's long-term buy signal - we would estimate it at 55% or so. In other words the situation is now mixed with a slight bearish bias. Is this enough to justify a short position in the sector? We don't think so, and consequently, we believe the speculative short position should be closed (naturally, we will close our own short positions as well - after sending this to you).

There are no changes in our views regarding the long-term capital.

Of course, there's always the next train and we can re-enter this position (or open a long one) when the situation becomes clearer.

As always, we will keep you informed.

Thank you.

Sincerely,
Przemyslaw Radomski