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Amidst Sell-Off, Is the Gold Trade Over?

Gold fell nearly 2 percent to two-month lows on Thursday due to technical selling and as worries over further monetary tightening in China triggered a commodities rout.

So is the gold trade over?

Despite the sell-off, Kanundrum Capital's Brian Kelly still thinks the trade is there. Marginal demand is still coming from both China and India, he said. Plus, there is limited supply because nobody's selling gold anymore, including central banks. Therefore, amidst the sell-off Kelly plans to buy the precious metal on the dips.

Joe Terranova, on the other hand, has been adding to his shorts.

"I think what's going on is the speculative froth that was in the metals space is coming out of the market," said Terranova, chief market strategist at Virtus Investment Partners. "I think the way that you identify that is what's going on with silver."

Silver , which sharply outperformed gold last year, dropped almost 4 percent for its biggest one-day decline in 1-1/2 months, sending the closely watched gold-to-silver ratio to its highest in nearly two months. Terranova noted that copper is also down. Both metals, he said, are speculative trades.

On technical charts, a new downward trend could be forming for the U.S. February gold contract after prices broke below their 100-day average to hit a two-month low on Thursday. Terranova said that for the past few weeks, gold has went through a series of lower highs and lower lows forming on the charts. To him, that suggests a downward trend for gold.

Dennis Gartman, a currency and commodities investor with more than 30 years of experience, agree with Terranova's comments. Gartman said most people were late to the gold trade and now it's winding down. He's afraid gold could fall to $1,270 an ounce within the next few weeks. For his part, he has cut back his position, but remains long gold.

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Trader disclosure: On Jan. 20, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova Owns (GLD) Puts; Terranova Owns (UPL); Terranova Owns (VRTS); Terranova Owns (PVH); Terranova Owns (GM); Terranova Owns (CVI); Terranova Owns (CNQ); Terranova Owns (LTD); Terranova Owns (C); Terranova Owns (PEP); Terranova Owns (CPX); Terranova Owns (ARUN); Terranova Owns (MS); Terranova Owns (RSH); Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Adami's wife works for (MRK); Finerman's firm is short (MDY); Finerman's firm is short (SPY); Finerman's firm is short (IWM); Finerman's firm is short (IJR); Finerman's firm is long S&P puts; Finerman's firm is long Russell 2000 puts; Finerman owns (AAPL); Finerman's firm owns (AAPL); Finerman owns (BAC); Finerman's firm owns (BBY); Finerman owns (BP); Finerman's firm owns (BP); Finerman owns (C); Finerman's owns (GOOG); Finerman owns (HPQ); Finerman's firm owns (HPQ); Finerman's firm owns (IBM); Finerman owns (JPM) and (JPM) leaps; Finerman's firm owns (JPM) and (JPM) leaps; Finerman's firm owns (MCD); Finerman owns (MSFT); Finerman's firm owns (MSFT); Finerman's firm owns (TGT): Finerman's firm owns (WMT)

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
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For Brian Kelly
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Accounts Managed By Kanundrum Capital Own (MS)
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Accounts Managed By Kanundrum Capital Are Long The Euro
Accounts Managed By Kanundrum Capital Own (TBT)
Accounts Managed By Kanundrum Capital Own (JJG)
Accounts Managed By Kanundrum Capital Own (DBA)
Accounts Managed By Kanundrum Capital Are Short The Yen

For Simon Baker
Baker Ave Owns (FFIV)
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Baker Ave Is Long the S&P

For Barry Ritholtz
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For Dennis Gartman
Funds Managed by Dennis Gartman are short Yen
Funds Managed by Dennis Gartman are short Sterling
Funds Managed by Dennis Gartman are long gold
Funds Managed by Dennis Gartman are long silver
Funds Managed by Dennis Gartman are long Natural Gas
Funds Managed by Dennis Gartman are long the Swiss Franc
Funds managed by Dennis Gartman are short the Euro

For Scott Davis
As of 12/31/10, Morgan Stanley owned 1% or more of (HON) common equity
Within the last 12 months, Morgan Stanley has received compensation for IB services from (GE), (HON), (TYC)
In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from (GE), (HON), (TYC)
Within the last 12 months, Morgan Stanley has received compensation for non-investment banking services from (GE), (HON), (TYC)
Within the last 12 months, Morgan Stanley has provided or is providing investment banking services to (GE), (HON), (TYC)
Morgan Stanley & Co. is a market maker in (GE), (HON), (TYC)

For Brian Stutland
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For Dan Niles
Alpha One Capital Partners has a position in (IBM)

For Aaron Rakers
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CNBC.com with wires. Reuters contributed to this report.