I mentioned in one of my earlier posts this week that bulls would need a Herculean effort to blunt the effects of Monday’s big downside reversal day. Guess what – they got exactly that!

In one of the more remarkable displays of gritty determination and tenacity that the gold market has seen since it first began its decade long bull market, the longs have completely negated the bearish downside reversal day pattern that emerged on the charts after Monday’s significant sell off from a new record high price. This simply does not happen very often, in any market for that matter, and has never occurred in gold since 2001. If you are a short, you have to be reeling in stunned disbelief. There are serious buyers at work in gold.

This performance is not merely impressive (that is too mild of a word), it is stupendously rare! Again, at the risk of beating a dead horse, the technical action in gold is telling us that the character of the market has completely changed from the pattern that we have grown accustomed to seeing the past 9 years and has now taken on a life of its own. This is acting like a market that wants to go higher, considerably higher.

To do that however, it now needs to take out the $1,265 level and hold that level for at least a 24 hour period. If it does, it is on its way to $1,280 – $1,285 for starters.

With open interest continuing to hover around 600,000 it is evident that the bulls did not engage in a mass exodus from the market after Monday’s significant drop lower but instead dug in their heels. That alone was enough to force the shorts to begin covering; it was also enough to bring in some new buying as well. Some would-be bulls sitting on the sidelines after Monday’s session noticed the price action and jumped back into the fray. The result – gold climbed all the way back from its low of the week and actually moved higher than last week’s close during today’s session.

Not only did the Comex gold market see a remarkable turnaround, the mining shares put on a spectacular showing almost completely erasing the damage down on Monday as well. The HUI dropped briefly below the rising 10 day moving average on its daily chart on Wednesday of this week but the rebounded during that session and has steadily risen since. It is back within striking distance of this week’s high just shy of 496, which if the bears are unable to hold, will set the shares up for a quick rise to above 500.

Outside market factors were not much of an influence on gold today as the equity markets were relatively quiet for a change as were the Forex markets. That is what makes the strong move up in gold more significant. Again, it is trading on its own merits – something which is contributing to the change in investor psychology towards this market. Investors want to own the metal – period!