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Gold and The Uncle Indicator

I know that when things get scary, many people run to gold. We have seen a lot of trading over the last year and an increase in interest. We have seen a substantial run over the course of this financial crisis but I am beginning to wonder if we are going a little too far. I am not just talking about the guys in the pits or trading in front of screen but those people who are selling their gold jewelry to all of these “mail your gold here” place that initially were advertised late night but now we are seeing mid-day on all the financial news networks. It’s one thing when they are trying to get grandma to sell her old necklace for extra Bingo cash, but when I am seeing these commercial running during the middle of a trading day I start to get a little concerned.

This is when I use what I call “The Uncle Indicator”. This is a very valuable indicator that I have been using in many areas of my life since my undergrad years. The foundation of this indicator is the Uncle that we all have - you know, the guy who knows what’s best for everyone especially when he has a beer in his hand. I first discovered this “indicator” when my uncle told me that I should be majoring in “those computers” not I.T. nor Computer Science but “those computers”. Shortly after this advice the dotcom bubble burst and there where a ton of programmers out of work. Then this uncle told me when I was an analyst that I needed to leave finance and get into the “real estate game” - this was circa 2006.

Lately, he has been asking me how he can invest in gold because he has seen it going up on the news everyday and I work downtown near those traders (he still has no idea what I do). While prices continue to rise, I get concerned as a trader because I’m smart enough to know the market is always right, so I am not quite ready to put in a contrarian play just yet but I do feel that the turn is coming. When everyone is hopping on the trade I am running in the other direction, so just about the time my uncle asks me to get him into some Gold contracts I will be shorting the hell out of it.

Disclosure: No positions