Just a quick message to keep you up-to-date. Today's move was quite sharp in gold, but it is still in tune with what we've seen in very similar situations in the past.

The most recent ones are the July 2010 and January 2011. Gold made a few attempts to move to new highs, and the final decline started when gold moved below its 50-day moving average. This is precisely what we have been seeing in the past weeks.

In both above-mentioned cases gold verified this moving average as resistance before declining once again (to the 150-day moving average). The move that we have seen on Tuesday took gold very close to its 50-day moving average - precisely as it had happened in the past. So the situation remains bearish - it's only more volatile. We're not "getting married to the July decline theory", but simply today's move is not much of an invalidation of the bearish case since it is in tune with previous bearish patterns.

The volume in gold was not too high today and that was also the case during similar situation in July 2010 and January 2011.

Mining stocks moved above their declining resistance line, but this breakout has not been verified yet, so - combining it with the above analysis of gold - is not a true bullish factor just yet.

Silver price moved higher as well, but it remains in the declining trend channel and - let us re-emphasize that once again - the current correction is not yet big enough as compared to other declines seen after major rallies. This factor makes us reluctant to believe that today's price action was anything more than an immediate-term bounce within a decline.

Summing up, we remain bearish on the precious metals sector in the short-term.

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Sincerely,
Przemyslaw Radomski