We believe an update is necessary at this point. Gold moved to its previous highs on strong volume and mining stocks moved higher as well. If it wasn't summer and silver was not in the situation it is right now (after a major top close to 1980 high) we would have no doubts to close the short position and we would be considering opening a long one. However the latter fact is not subject to discussion, so the reason for gold's rally may be that the seasonal top in gold is not a single or double top, but a triple top just like the one we've seen at the end of 2010. Silver is not making new highs just as if it "wanted" to correct in the regular way (that would point to $26-$30 target area) and we continue to believe that this will be the case.

Meanwhile, the USD Index moved above its rising trend channel and is in the process of confirming this breakout (key support levels are at 75.2 and 75.6). If USD establishes a move in a given direction (and it once again seems to be up), gold will react in some way. If it will be up, then we will close our short position in gold and most likely open a long one. For now, we continue to believe that gold will move to its 150-day moving average in the following weeks (to $1,460 or so).

So, reaction toward a breakout in USD is one thing that could invalidate our bearish views for the coming weeks and the second one would be a confirmed breakout above previous highs in gold. Other things that we will be monitoring include silver's performance relative to gold and the changes in the stock market.

We'll report to you as soon as the above changes.

Thank you.

Sincerely,
Przemyslaw Radomski