brewtul

Gold: The Only Remaining Bubble?

To take your points in order; firstly, to demonstrate a bubble you need to demonstrate a complete detachment from fundamentals. The degree of margin used in buying an asset is not in and of itself sufficient to identify bubbles. Robert Shiller's excellent book Irrational Exuberance defines bubbles as a psychological phenomenon in which rising prices and belief in a new paradigm, rather than underlying fundamentals, sustain a price advance. While those conditionas may or may not exist in the gold market I think you have fallen well short of proving that they do.

Secondly, historically gold has risen in times of inflation as well as deflation. The reason gold rises during deflation is that it is the only asset without a corresponding liability. Put simply, gold cannot default. During periods of deflation default of financial instruments accelerates and is the greatest fea. It is this fear, not the fear of infation eroding wealth, that is the current driver of the gold market.

Thirdly, I will not argue with your interpretation of the technicals, but will say that over the last twenty years as the markets have become ever more enamored with technical analysis the chance that they will have any utility greatly diminishes. Whatever edge, if any, they ever provided simply cannot be much anymore as everyone is using the technique. The true contrarian play then would be to completely ignore technicals.