Eoin Treacy's view Unsurprisingly, gold miners are reporting rather favourable earnings as gold prices hit new highs. However, they have all also reported higher costs which they typically find rather difficult to manage. Major un-hedged gold miners, such as those above have for the most part underperformed the gold price over the last few months but outperformed the wider market of late. (Also see David's comments on Tuesday for a discussion on why this is the case).

At today's high of $1814.95 the gold price was almost $350 overextended relative to its 200-day MA. This equates to a 20% divergence. At the May 2006 peak gold had become 28% overextended relative to the 200-day MA. At the 2008 peak gold had become 29% overextended relative to the 200-day MA.

Delegates at the Sydney Chart Seminar in May will recall that the CME was raising margin requirements regularly as prices accelerated higher. This is a process associated with all futures and serves to maintain orderly functioning of the market as investor risk appetite increases. Margin hikes eventually squeeze out highly leveraged traders leading to the onset of a corrective phase. Gold is not currently as overextended as it was at other important peaks within the secular uptrend, but it is becoming a higher risk proposition. Margin requirements were hiked by 22% today to $7,425 per contract from $6,075. This story by Glenys Sim for Bloomberg may also be of interest. Gold might still move higher but if its does the margin requirement will be hiked again. Last week's downside key reversal was a warning shot. Today's downward dynamic from a much high level and following an acceleration is at least an additional warning shot. Additional follow through will also be required on this occasion to confirm a decline in risk appetite.

Acceleration is a Type-1 trend ending characteristic as taught at The Chart Seminar. We describe it is an ending but of undetermined duration. Gold has clearly accelerated. It cannot continue to advance at this pace indefinitely. Tight money control discipline and a trailing stop would now be appropriate for leveraged traders.

The last meaningful range gold formed, between May and mid July, had an amplitude of approximately $120. The reactions between October and February as well as between May and August 2010 were relatively similar sized. These could be considered 'normal' reactions within gold's consistent medium-term uptrend since late 2008. It would have to sustain a decline of greater than $120 to suggest a change to this rhythm.

"Don't pay up for commodities" has become a mantra at Fullermoney over the last decade. Reversions towards the mean have been attractive entry points for unleveraged medium to longer-term investors on successive occasions over the last few years. There is nothing to suggest that this will not remain the case in future. Therefore as gold accelerates high is it a better value proposition now rather than following a pullback and reversion towards the mean? (Also see David's Email of the day (3) - on the "last man standing" yesterday)

The NYSE Arca Gold Bugs Index continues to range mostly above 500. A sustained move below 480 would be required to suggest medium-term supply dominance.