Impressions on Gold

Well Gold is back in the limelight, every place you look there's a different take on why gold is a buy here, it may be, but it is still a suspect top. One of the things that all bubbles have in common (at least from every major bubble I've studied over hundreds of years, from the Dutch Tulip Mania to the South Sea, to the Dot.com and recently the housing bubble) is the phrase, "This time it's different". There also is a number of bubble related businesses that pop un around the bubble, in gold's case, the $300 courses on how to become a precious metals scrap dealer. Then there's the layman turned expert, I've seen a lot of them among my peer group, they proudly proclaim that they are buying gold and silver. When one of my friends recently showed me some silver Eagles he picked up on the internet, I asked him why the edge had an obvious seam? As far as I know, the coin wasn't originally minted in two separate sides and put together (which leaves a seam). To make myself even more unwelcome, his wife was showing me a Tiffany Heart bracelet she picked up on the cheap on Craig'sList, apparently it was an unwanted Christmas gift. The only problem was a knick in one of the links that had scratched away the silver plating, revealing some yellow colored core.

These were the same friends who became real estate speculators in 2006-2008, yes they flipped a few houses as the wife who is a home schooler went around the neighborhood talking to people about buying their houses before they were listed. Long story short, after making $90k profit on the last flip they did with some other friends (which ruined their friendship as they argued over what type of base moulding should be used in the rehab), they got greedy and bought two houses to flip and the bubble burst, particularly bad in our area, about a 50% decline. They got out of one, but now have 2 mortgage payments to make as the renters in the second house don't cover the mortgage, so that's about a $500 extra payment every month for the last several years. Meanwhile they're about to lose their wind insurance because their own roof needs to be replaced.

Get the gist of the mania that runs wild among bubbles? No one can ever imagine the end, but despite all odds, the end eventually comes.

As for gold,

 Here's the notorious 150 day moving average that has been the best buy point upon a pullback for the last several years, it broke for the first time and to show it's still widely followed by GLD traders, look at the volume as price broke through on Wednesday, the follow through has been less impressive and this is the normal behavior we've seen at virtually every top that has broken, a rebound after the break back toward the top, just like we see in equities right now.

 Short term 1 min 3C at the break above the 150 ma

 There was accumulation setting this run up, however once again at the breakout,, 3C is not confirming.

 The 5 min chart shows accumulation for the breakout and is thus far trading sideways. Weakness in 3C always starts on the lower timeframes and if it is serious enough, it migrates to the longer timeframes, so we have a hint, but not confirmation of this being a false move.

 The 15 min chart accumulation and a not so great looking placement of 3C right now.

 Here's the big picture, GLD was accumulated and we have confirmation here, whether that stays or whether we see distribution will likely answer the question of whether this is a gold top.

I created a quick indicator of the average true range of GLD prices, during the uptrend it was quite stable, however volatility is seen both at the bottom and the triangle which I suspect is a top.

As for myself, I'm not a buyer of precious metals right now. I actually prefer Reef Coral propagation, it's a hobby that isn't going anywhere, it's not saturated with laymen, there are more corals on the endangered species list which means they have to be sold as tank raised and it's something I enjoy, plus the fact that the corals I use to buy for $50 are now fetching $400.