Gold May Be Getting Too Hot, Too Fast

"Gold rose 600% in the 1970s and then went down nearly every month for two years," said Jim Rogers in an interview with Financial News earlier last week.

"Most people gave up – but then gold went up another 850%."

Fast forward three decades, and most people are giving up on gold yet again. Punters in StreetTracks Gold Trust ETF (GLD) have shed 6% of their holdings from this time last month – the first ever drawdown since it launched in 2005. Gold futures traders cut their net long positions by 16% last week alone.

"That’s what happens in bull markets," shrugs Rogers, world-famous author of Adventure Capitalist. Now he foresees a "sizable near-term correction" says the New York Sun, after long-gold speculators grew their position so massively compared with the size of commercial gold traders' short positions.

Typically a bearish sign, it showed the gold market getting too hot, too fast. But once the speculators get squeezed out – and they're being wrung dry right now – gold will be ready to make the next leap higher.

Timing your next purchase should prove as tough as picking the top of last month. But last time the gold price enjoyed a multi-year run – during the inflationary 1970s – Rogers Quantum investment fund gained some 4,200%. He's seen enough bull markets since then to make more money still.

The herd, on the other hand, is looking to quit gold for good.

Who's likely to prove right – and make the big money?