Gold futures were down over $25usd Friday morning. The mainstream financial media will have investors believe that it has something to do with the Euro crisis abating somewhat. Portuguese and Spanish bond sales did well last week, thanks to the cavalry known as China and Japan (not), but overall gold prices don’t need a reason to fall. Gravity should do the trick. Be sure to take a look at the 1m chart.
You can see the bubbliness happening around you. Let’s start with CNBC, whom we refer to around the office as the markets soap opera for the retiree set. Here’s a taste for how much they pump gold:
Whoever said CNBC does not have good content… Of particular note is Cazenove’s technical strategist Robin Griffiths. “I think not owning gold is a form of insanity, it may even show unhealthy masochistic tendencies, which might need medical attention. Real assets hedge paper money being printed into oblivion, so you’ve got to own gold and you’ve got to own other commodity-related investments still. Gold is far from being an over-owned trade at the moment, far, far from it. Although it’s been a top performer for each of the last ten years, it’s still in a linear trend. Eventually it will go exponential and make more in the last little bit than the whole of the ten year trend.” That pretty much covers it. – Zerohedge
Not owning gold is a form of insanity – what can I say. If a gold crash does come, I think we'll dip below 1000 in the end. There will be a lot of support there, but the big traders would likely take it through the 1k level just to scare people good. Doug Kass has laid out a good case for catalysts of a gold deflation scenario – a natural economic recovery, investors pouring into stocks as earnings surprise to the upside, the US does something about its budget deficit, etc. These are great but don’t acknowledge Gold’s bubble status at the moment. Kass’s anecdotal example however, does: offers to buy gold replacing Viagra solicitations in spam email, handheld placards for “We buy gold” replacing “condos for sale” placards in Florida, gold exchange stores replacing pop-up real estate agencies, and gold ATMs built by a pink sheets company.
After all, these sorts of examples are what instinct relies on – in 1929, when asked how he knew the crash was coming, Jesse Livermore explained that he started shorting everything after a newsie kid kept pestering him about how much money there was to be made in stocks. Just look at the pattern – 1999 dot com crash, and housing in 2007, and see if Gold matches up with what you remember. That should tell you everything.