Nobody could put it in better words that Babak over at Trader's Narrative:
The big news this week, of course, was silver. I did not mince words when it came to this market, even though what I was saying was not popular. Normally, after such a vicious decline we’d expect bullish sentiment to be annihilated. But that’s not what we’re seeing in silver right now. As silver grasps for support, retail traders are bloody but unbowed, muttering about COMEX/CME conspiracies. On Monday the initial and maintenance margins will be $21,600 and $16,000 respectively. To get a glimpse of the retail mood, read the comments on this article.
As I warned, gold would be affected by the implosion in silver. My previous commentary on gold sentiment also provided several reasons why gold, by itself, was top heavy and especially vulnerable at this time to being pushed by silver’s decline. In the short term, gold is close to finding support.
But we don’t have strong indications that this would be a lasting floor. The Hulbert Gold Newsletter Sentiment index dropped from its recent high of 74% to 67%. But that isn’t enough. At the February 2011 lows, it was below zero (the average gold newsletter editor was recommending a slight short exposure to gold stocks!). So I would still be leery about gold, unless you’re playing it within a very short time horizon. From this and other sentiment indicators, it looks like we need to flush out the weak hands a bit more before being able to resume the long-term uptrend.