Gold do we hold or fold?

On my last post I told the gold bulls to cheer up because the worst may be over because the generally bullish Dennis Gartman said he expects the yellow metal to fall to $1,450 an ounce before it breaches $1,800 and Gartman has fully closed his gold position. Since Dec 12 gold has dropped from 1666 to 1575 and so we need to take a look at the technical picture.

Our chart today is the daily closes of the NYMEX gold plotted above the AMEX Gold Bugs Index. So far this looks like a simple A-B-C type correction in both plots. Currently there is a small degree of bullish positive divergence with the AMEX Gold Bugs printing a higher corrective wave low (C) relative to corrective wave low (A). We need these lows to hold in order to avoid a (C) wave extension. When you look at a very long term weekly or monthly gold chart the primary up trend line has not been violated.