Thursday, July 28, 2011


The persistent and mindless bullishness on gold lately has got me nervous. When I get nervous the first thing I do is pull up a multi-year chart and look at the big picture.

A couple of things are apparent when one looks at the chart below. First as I've noted many times in the past gold has a tendency to move above a big round number before topping. It did it at $1025, $1225, $1432, and gold  recently tagged $1630.

Another glaring discrepancy in that chart is the utter failure of the miners to participate in the last 200 point rally in gold. As a matter of fact the miners could possibly be forming a head and shoulders top.

We can also add to this the fact that sentiment has reached levels that in the past have triggered intermediate declines. Plus gold is now stretched above the 200 day moving average.

Now I don't want anybody to think that I have all of a sudden become bearish on gold, I haven't. Gold is quite obviously in a secular bull market. I am however beginning to question whether or not the low we saw three weeks ago was an intermediate bottom. I have been riding this bull market long enough to know that when everyone is rabidly bullish (especially me) it's about time for gold to throw a curveball.

Until the dollar breaks below the May bottom I think we need to be very careful in assuming that gold is going straight up.


  1. Gary,
    That's a good observation about Gold. Maybe this time it will make it to about $1650 before it has a good sell-off. That's what is measures on the breakout from the rectangle... M-

  2. Gold doesn't have to follow dollar.
    As time goes by, dollar will has less and less influence on commodity markets and other currencies.
    Regarding miners, my belief is that they are no longer perceived as "investing in gold".
    They are considered to be just plain stocks like BRCD or AAPL and they rise or fall along with the rest of the market.
    Ivesting in gold is only in physical and gold ETF's.
    I wouldn't touch miners with a long stick and i have been telling this to my friends for months now.
    Miners are complete waste of time and money

  3. Don't we always "need to be very careful in assuming that gold is going straight up?"

  4. i think, gold will fly higher and higher....

  5. Gary,

    I think nothing will change with the debt ceiling debate other then the debt will be raised, and the spending will continue. Then the U.S. debt will be downgraded be rating agencies and physical gold and silver will become the defacto wealth standard and move much higher from the current price levels.

  6. As one person has said, "Look at what they do, not what they say". Default or not, we will never pay all this debt. They don't seem to want to correct the problem but add to it. Debt will grow larger. The system will eventually collapse. Maybe not this year but when the dollar goes to nothing. Gold will stumble but come back. Each time it comes back it grows larger. As long as they continue to use fake figures as money, gold will rise. Silver as well. There is no end to this for years. Get ready for Hyperinflation.

  7. Gary,

    Gold may be a little ahead of itself, but hasn't extended too far, in my opinion.

    Three reasons:

    1) The RSI Indicator is currently under 73. I would consider 80 - 85 to be an "overheated" condition.

    2) The price range is well within the Bollinger Band upper limit, and not stretched beyond 1 Standard Deviation.

    3) The PPO is currently under 1.6. I would consider gold overextend if the PPO were over 2.0.

    All this is not to say that gold might not take a breather from here. I just don't see anything in the charts that are causing me to take short term profits yet.

    Also, I think the Gold Miners may be under-priced.

  8. I went over extensively what I think is happening in the weekend report. Let's just say there are a lot of warning bells going off.

    At this point I don't think it's necessary to catch every last penny of the rally. We did that in May and got our teeth kicked in. I would prefer not to make that mistake again.

  9. Why would anybody try and time gold? This country has record debt with zero growth and a government looking to continue pillaging the producers to provide entitlements to the parasites. Nearly all major world currencies are in a Kenysian money printing trap looking to avoid default. Until these scenarios change gold will continue to go up. If you want to invest in gold just buy it on weekness and never sell until the above mentioned conditions chnage. Thats it!


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