Let's go to Bubbles! BUY GLD: $65.58
My behavioral algorithm says buy and my behavioral research says buy. This is as good an entry point as any. GLD closed at $65.58 on Friday. Volatility is very high, so there might be a much better entry point than $65 ($60?, $55?) over the next few weeks, but I wouldn't recommend waiting.
Gold has entered a speculative bubble phase that might eventually bring its spot price well over $1000/oz. Perhaps $2000/oz. Seriously. Gold is the investment most likely to follow in the path of Beanie Babies, tulips, baseball cards, and .com ipos. There's a fixed supply and it's easy for anyone to buy it. As long as the volume traded keeps increasing, prices are likely to keep increasing.
Speculative bubbles are a powerful force of complete instability. The scenario works something like this: Future events that smart investors have already priced into the value cause a new wave of buying by less sophisticated investors. Prices rise to $800, a level which smart investors now think is expensive. But this price rise to $800 attracts even more less sophisticated investors who want to get in the riches. Gold seems to be the best game in town. Media coverage builds and announcements of actual inflation in teh economy seem to justify prices. Momentum driven price increases continue, and "smart" investors begin to short gold. Now, the "smartest" investors, realizing the inherent instability of the situation, add fuel to the fire and start buying even more. Everyone is talking about gold. The price shoots past $1000 and the "smart" investors get scared. They cover their short positions as momentum players keep buying and the price of gold doubles quicker than anyone thought possible. Its the best possible investment! A real store of value that people will always want. The currency of the world. Some think it should be worth $5000 an ounce.
That's the speculative blowout. A few months later it turns out those "smart" guys were right. It's not worth more than $800 an ounce.
Bubbles are fun to be invested in. The only safe way to make money is to get in early.
It's not early. But it's not yet late. Enjoy!
posted by Seth @ 5:17:00 PM
3 comments
3 Comments:
Sounds like a lot of the hype newsletters i've been getting. Sure it's possible for gold to shoot up. But historically, silver moves preceed gold and silver has cooled. For the squeeze scenario to happen w/o a silver move, the dollar will have to go lower and show weakness. the GLD chart looks ominous too. becareful and GL
no doubt weijo, the technicals look terrible. That's part of the reason I made this call. The bubble scenario is unlikely. However, it is so potentially rewarding that I think it's the side of the trade you want to be on.
An out-of-the-money option on the price of gold would be the better investment.
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