Albeit it’s still seasonal prime time for gold. There should be many great weddings in India, drowning in gold. And, heck, I agree with the scathing write-up on ZeroHedge about why this isn’t the blow-off top on gold. Regardless, I’m still a bit suspect of this market. There are a few things I want to say on the subject:
- The price of gold can come down really fast. If you haven’t been long gold past a top before, you are naive. This is a speculative market. It’s a small market. And, when it is time for it to take a break, watch out. I remember being with a bunch of trader’s in Vegas during a metals run a few years back. Sometime during day two of our stay the market turned over. It ruined the visit for a number of new friends. In short, don’t fall asleep at the wheel. Just like any other market, this one is prone to sharp corrections.
- We’ve come a long ways. We are up about 30% since April.
- I’m seeing signs of technical divergence surfacing on the price charts. I’d go into more detail. But, in this case, the technique I’m using is not published. It’s not one I came up with. But, it’s really not mine to share presently.
I’ll I want to say is be very weary of your long positions.
Even better than some general advice, let’s take a look at some recent history so you can get a feeling for 4th quarter gold prices:
Gold at the end of 2004:
Gold at the end of 2005:
Gold at the end of 2006:
Gold at the end of 2007:
Well, that’s 4 out of 5. In 2008, gold had started a significant pullback earlier. It was not up to it’s usual self. Needless to say, this year’s market is set up for an opportunity here. But, I am definitely not encouraging anyone to be shorting gold at these levels. Just because the opportunity may be there, it may not be the smartest trade.
