By way of history, we have been bearish on Gold for quite some time in the research I write daily for Waverly Advisors, and we hold a short that was established 9/23/13. There is potential for a dramatic pattern failure here, so this is absolutely not a time to “have conviction” or to stubbornly short into pops. Rather, appropriate stops should be used on existing shorts, and new trades only initiated based on clear and strong patterns. Having said that, the current small rally, dating back to mid December, is most likely a pullback on the higher timeframe. Traders not holding shorts could initiate on weakness below recent support, and the failure of those new trades could be a signal for existing shorts to lighten or reduce positions. Technical patterns can set up and motivate trades, but they are maybe even more meaningful when they are used to assess the overall balance of buying and selling pressure in a market. In this case, precious metals are poised on a knife’s edge: tremendous downside potential, but also the risk of a sharp “short covering” rally if the moves fail.