About Me

Retired chief investment officer and former NYSE firm partner with 40 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 !!!

Saturday, April 06, 2013

Gold Price -- More Comment & Some Conjecture


Using a small amount of trading capital, I have been shorting the dips in the gold price
very profitably since Oct. '10. It has been my contention that the Gold price confirmed a
price bubble back in 2011 when it first topped $1,500oz. In my view, the bubble run
started in late 2005 when gold rose above the $500 level. Since you have to allow a
3-4X move up in a price bubble, I put gold up at a top range of $1,500 - 2000, although
I did not hold out a lot of hope for $2,000.

Now is not a good time to short gold since it is oversold, and as discussed in the post
immediately below, the bugz have been successful at staunching declines around well
defined support at $1550oz. I have no interest in going long gold as I will find profitable
and safer trades elsewhere, but if the metal fails to rally further ahead, I would have a
significant interest in shorting it again should it break the $1525 level decisively.

Gold has gone up on a parabolic with the $1900 + level seen in 2011 representing a near
perfect ending to the run. History shows that it can be very difficult to fully resuscitate a
completed parabolic that has moved into correction mode. Here is the longer term chart
for gold. Monthly Gold Price

The parabolic move in gold is longer and less vertical than the 1976-80 parabolic which
came shortly after the gold price was deregulated in the US. Note the initial big rally in
the metal that came later in 1980 after the parabolic up was completed. Note as well the
dramatic fail that took place when the bugz could not ring in a new high. Looking far right
on the chart, you'll see a similar failed rally up to $1800oz. last year. The point here is that
continued rally fails above the current rough $1550 support level could lead to a big
correction as the safehaven premium in gold contracts. Now this is all informed and not
idle conjecture, but it is conjecture nonetheless.

For now, the bugz have to rally gold further off the recent $1550 area of support and hope
enough scary things happen economically and financially to take out formidable resistance at
$1800.

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