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We Apologize for Interrupting the Gold Rally, But…
by Robert Williams, Publisher
Tuesday, November 24, 2009
The fascination with gold of late is incredible. Now, I’m well aware of its abilities to hedge the risk of inflation and weakness in the dollar. But based on the demand-side dynamics we’re witnessing, you’d think the end of the world is coming.
Gold has surged 60% in the past 12 months, with no signs of letting up. The yellow metal – trading for about $1,164 an ounce – is establishing new highs on a near-daily basis.
You see, with the dollar in freefall, central banks and hedge funds have sought shelter in hard assets, particularly gold.That’s a big reason why the gold rally has been so remarkable.
But demand is coming – full throttle – from consumers, as well.
Here in the United States, sales of gold coins are up as much as 75%.
The UK’s state-owned Royal Mint told Bloomberg News that its production of gold coins quadrupled during the third quarter from the same period last year.
And Chinese consumer demand for gold rose 12% in the third quarter to a record high.
Gold is a global phenomenon. In fact, we’re so in love with the gold rally that I haven’t heard anyone mention the word “bubble.”
Haven’t we learned our lesson? Look at any recent bubble – dot-com, housing, Treasuries… When the average Joe thinks there’s an easy buck to be had, that’s a cue to take cover. Fast.
All I’m suggesting is that you stay informed.
As such, pay close attention to Karim’s article. Because he’s saying what others are not – that gold prices may be headed lower in the coming months.
And he’s not playing a hunch, either. His opinion is based on what prevailing option prices on gold shares are telling him.
Ahead of the tape,
Robert Williams
- Bernanke Just Squashed the Gold Rally, Now What?
- Why the Gold Rally Has Some Feeling Cheated
- Breaking Down the Disparity Between Oil and Gold Prices
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2 Responses to “We Apologize for Interrupting the Gold Rally, But…”
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In addition to once being a full-time trader of equities and equity derivatives, Robert Williams has also served as the lead financial analyst for a Forbes top-50 private corporation and an analyst for the endowment of a major academic institution.
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November 26th, 2009 at 10:53 pm
As Jesse Livermore once said, “Never sell anything just because it has gone up.”
What are the fundametal drives of the rally since it began in 2001, and the trend lines?
Have they been violated? Are the drives changed?
Hint: the driver is negative rates of return on dollar assets.
Until then one buys the pullbacks and sells strength for short term trades, but never gives up their fundamental position.
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December 2nd, 2009 at 11:08 pm
I agree with Jesse. As in any bull markets, there will be pullbacks or corrections. But my personal barometer for a bubble are a few very obvious red flags.
1. Gold is on the HEADLINE NEWS of major newspapers for at least once a week.
2. Gold is the topic of discussion at social circles and parties where most people are not traders or brokers or financial analysts.
3. Your grocery store clerk, your taxi-driver, your shoe-shine boy, and your neighbor strikes up a conversation with you about gold.
4. You go to a jewelry store, and you see a long line of people, and they are there to BUY gold.
5. As in 1, major news media hosts talk about gold on a weekly or daily basis.
If above 5 red flags or most of them are showing, it’s time to dump gold in a hurry.
Thanks!
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