Gold About To Crack?

May 11, 2006

Gold has now been up (priced in U$) nearly nine weeks in a row:

   ----     -----
  Mar 10   541.30
  Mar 17   555.10
  Mar 24   560.50
  Mar 31   581.80
  Apr  7   588.40
  Apr 13   596.50
  Apr 21   632.20
  Apr 28   654.50
  May  5   684.30
  May 11   721.50

Look at these opposing price swings today (May 11, 2006):

  Price of gold:
    U$ 721.50, up U$ 15.80, up 2.24 %

  XGD (Barclays iShares gold trust, TSX):
    C$ 87.72,  down C$ 2.06,  down 2.29 %

I’m no believer in the predictive power of technical analysis, and normally would think nothing of such swings. But still. Trees don’t grow to the sky and there is cleary a bubble. No-one can tell, without being lucky, precisely when the bubble will crack, and when it cracks, whether it will continue upward again, or be a final burst.

Predictions of this kind make mortals look like fools. Being both, I’ll have a little fun by stepping in front of the freight train right here. How about:

  • Gold cracks imminently: starting within 1-3 days (i.e., heading down by May 16 at the very latest (and I am thinking probably tomorrow (except that it’s pre-weekend)));
  • The crack will be significant: say U$ 70 to 100 down (counting intra-day) when all is said and done;
  • The crack will be swift: 7-10 days to the bottom from the top;

Even if this happens, my guess is the run is not over, it will likely surpass the previous highs.

Caveats: All of this is just bemused observation, for fun, by a non-professional. I don’t know anything, because there isn’t anything to know. Don’t base any investment decisions on it! What you do is your responsibility alone.

Disclosure: I am neither long nor short any pure gold plays. In fact I’ve never gone short anything, and have held no pure gold stocks or precious metals funds for nearly the last 3 years. I do own a very small amount of Teck Cominco, a mining company with a bit of gold exposure.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: