I have written several entries about gold during the last few months and in each case, I was pointing out that the large speculators were too optimistic for my liking.

The sentiment has finally shifted and now large speculators are only long approximately 175,000 contracts.

It may seem odd that being long 175,000 contracts is a major shift, but this is the smallest net long position the large speculators have has since the summer of 2009. When I combine the shift in sentiment with the chart of gold, I find it encouraging.

During the past two years, gold has been in an upwardly sloped trend channel and the lower rail is currently in the 1280 range. The 1280 level also happens to be where the 200-day moving average is currently.

With the sentiment shift and the two layers of support just below, those investors that have been looking for a chance to enter the gold market may be getting their chance.

The pullback has also allowed gold to move out of overbought territory and is approaching oversold territory.

Click on chart to enlarge.