A couple of pals of mine talked me into playing the gold market over what was roughly
the 1975-80 time frame. Those were terrific trades, but as I met more gold players, I
found that aside from the momentum players, these were different folks. Let's just say
that if they were earthlings, then I was from Mars. I have never forgotten the range of
differences in world view that existed between the gold guys and myself. There are
such sharp points of departure that I realized that to belong with the goldies, I would
have to occupy alternate worlds. I've always found enough opportunities in my areas of
interest, that I have not attempted to re-enter Goldland. I did think gold made decent
sense as an investment over 2001 - 2005 because it was undervalued. Since then though
things have been getting out of hand. I even did a nice SLV silver trade in early 2009,
but for the most part, other markets have offered fertile enough ground. With that as
prologue, I'll make a couple of observations about the stuff.
I thought gold was a little toppy at $1250 in Jun. of this year, but the upleg has been
maintained and extended. Gold is obviously short term overbought on RSI, but less
so on MACD and against its 200 day m/a. My fundamental macro-directional
indicator has turned up moderately in recent months, but there may be up to $100 oz.
in short term exitement in the price now. My "proprietary" frothometer now has gold
at about a 55% premium compared to the base trend going back to 2001. That is
a big premium and is a warning that gold is now very extended, much as it was in mid-
2008 and in the spring of 2006. I am also still of a mind that the leg up which began
in Feb. of this year is the last one before a much larger correction. So far, that last
observation has proven off-base.
If there are gold players in the audience, then I hope these comments are of interest.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!