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About Me

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 !!!

Thursday, January 13, 2011

Gold Price

My view on gold remains unchanged since the early Oct. '10 post. I see the metal in a bubble
with an empirically warranted top of $1,500 oz. based on  studies of a wide range of capital
markets bubbles over the years. This view is clearly well in the minority.

The gold price has lost its positive momentum in recent weeks after rallying strongly over the
autumn to overbought levels. It has recently fallen back through the top of its primary trend
band as it did in both early 2009 and 2010. Right now this looks like a normal pullback from
a shorter term extended position. Based on my weekly chart, I would have to say that gold, which
closed today at $1,373, could fall to $1,300 in the weeks ahead and still not violate the uptrend in
price in place since late 2008. A sharp break below $1,300, should it occur, could well be a
more serious matter.

I link to the weekly gold chart below, and I would note that the 12 wk. RSI is in a downtrend
which has rarely fallen much below 50% in recent years before the bulls have moved in to
support and rally the price (gold chart). So, sometime in the next few weeks we can look to
see if the bulls do jump in again to reverse the deterioration.

I have been using the leveraged short ETN, symbol DZZ, to trade against the gold price. I
am using a small portion of trading capital to do this and have made two round trips with
a total gain of 13%. As they say, do not try this at home.

1 comment:

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