Posted on 06/08/2010 6:17:06 AM PDT by danielmryan
The price of gold could drop 40 percent from its all-time high because of bearish technical momentum and deflation amid a European debt crisis, said Elliott Wave International President Robert Prechter on Monday.
Prechter said at the Reuters Investment Outlook Summit in New York that recent readings of gold market psychology showed a 98 percent bullishness in the metal, the highest ever recorded for any physical commodity.
He said, however, that technical momentum was stalling for gold as the rate of increase had peaked in 2006, and that each subsequent rally since then has risen at a slower rate.
"That is not a guarantee of change but a sign that one is likely."
(Excerpt) Read more at reuters.com ...
Every time I see a hit piece like this Gold goes up.
No matter how many bubbles the market creates, there are always plenty of people thinking this one is different. It never is. Hard to time it, but you know it’s going to pop sooner or later. Seems to me it’ll hover up there in the clouds until the recovery starts for real, whenever that is. Then, people will be holding a lot of overpriced gold, unless they are smart and sell before it falls.
“In terms of timing, the time to get excited about gold was back in 2001 when no one wanted it, and now everyone seems to want it, so I don’t.”
The money quote.
I guess gold picked a good day to break $1250!
That assumes improvement, there is a strong possibility things can grow much worse as those Debt positions have not been unwound, either private or public.
I’ve learned my lesson. I just hope I live long enough to execute it. The time to buy gold is during an equities boom. The time to sell is during times like right now. So, next time the market is humming and everyone is happy, I’ll buy gold. Then, when the next crisis hits, I’ll sell. Just need to live another 30 years or so to get through the cycle one more time.
Yeah, things can definitely get worse. Still a lot of unwinding to do, and no place to hide. Even so, gold prices are so high at this point, it seems pretty risky to buy any now, with more downside risk than upside. I’m sure the smart players bought all their gold during the boom times, at $400/oz. If people are buying all this gold, someone is selling, right? Sellers-smart. Buyers-not so smart.
Realistically, gold isn’t going to drop to $750. Not that my demand will affect the market, but World governments will be devouring every bar on the market before it reaches anything near $1000 (remember the big ChiCom buy at $1045?)
Any drop below $100 is unlikely, and would be brief and minimal. Mainly because the fundamental reason for owning gold by anyone have not changed (securing assets against the ravages of inflation due to debasement of currencies in response to irresponsible government spending.)
I don’t often agree with Mr. Pretcher, but the gold trade is getting mighty crowded(everybody wants to own it). Typically, this much bullishness on anything is a good sign that the price will soften, at some point.
If you’re going to buy a gold stock, or gold ETF, be careful to use it as a hedge only. Meaning not more than 5% of your portfolio.
Good luck, and “let’s be careful out there”.
I hope he’s right so I can buy some more at the lower price.
Be fearful when others are greedy, and greedy when others are fearful.
That’s right, Bob. Fundamentals don’t count, only waves count.
Prechter got a lot of people fooled in the ‘80’s and it looks like he’s still at it.
I got in about 18 months ago when it was high 900’s. I’m very happy!!!
Yeah, gold is a hedge. But the idea is to buy low, before the risk that you are hedging against emerges. Gold buying now, seems to me, is based on fear. But that to me seems like it's too late to buy, unless it's purely speculation. The time to hedge against inflation, I think, is when there is no risk of inflation, because that's when you get your inflation hedges on the cheap. Now, you're buying them at a premium. The sellers are the ones successfully hedging. They bought at $400 and are selling at $1200.
So when do you plan on selling?
“I’m sure the smart players bought all their gold during the boom times, at $400/oz. If people are buying all this gold, someone is selling, right? Sellers-smart. Buyers-not so smart.”
Believe it or not there are gold bugs predicting gold at $5K and ounce. If this comes true things will have to be pretty bad worldwide (like a world war or something).
http://www.brooksbrothers.com/IWCatProductPage.process?Merchant_Id=1&Section_Id=576&Product_Id=1450199&Parent_Id=216&default_color=GREY&sort_by=§ioncolor=§ionsize=
That's fine. Hell, for all I know, it could hit 5000. But to me, at this point, that represents a speculative play, not a conservative hedge. If someone has 1200 an oz to gamble with, more power to em. But that's gambling.
If you bought back in the salad days when it was $400/oz, that wasn't gambling. That was a hedge. It seems to me that a 300% return is a pretty good hedge against inflation. And at 400/oz, a pretty safe investment. At 1200? Not so safe. Again, if someone is buying, someone is selling.
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