In a note written very early today UBS displays some alarm:

"While physical demand is very decent as the chart below shows, it is not off the scale. And this physical demand as a stand alone element is not in itself sufficient to prop up the gold price…Few investors are likely to add to their long gold exposure down here – afraid of catching a falling knife - until some sense of stability is restored to price direction…But one of the few positive angles in the market right now is the visible physical demand and interest will only pick up as gold moves lower. Gold is trading at attractive price levels for Indian and Chinese customers. In CNY terms, gold is trading close to price levels that were significant last February when this market was very active."

Also The Gartman Letter is getting unhappier:

…what can one say other than any and all support for gold has been broken …were we forced to take a trading position we’d sell gold short, for the longs now have several months of strong overhead resistance to overcome before they regain the upper hand. That may well take weeks, if not months, to accomplish and we’ve other markets far more interesting to involve ourselves in.

In my view this is premature pessimism: the physical market takes a little time to respond.

If Dennis G is a barometer of what other of the speculatively minded are doing, it just could be the specs are loading up on the short side now. If so, we have some setup! Each time over the past decade the specs have dramatically shifted their focus to the short side, it has been followed by big moves to the upside!