Where is gold heading?

2009-01-30
Gold is all the rages these days.

Let's take a look at the bull's arguments: 1) safe-haven bet: whenever there is financial turmoil (lots of them lately) or geo political conflict (Gaza strip invasion recently), Yellow metal is shining. 2) Fed/Treasury and Congress are spending like no tomorrow (all the bailout and stimulus) and flood the system with vast amount of liquidity. The end result is inevitably inflation. Gold is the best inflation hedge. 3) The other side effect of huge money supply is the declining dollar, which is the denominated currency for gold. 4) Last, not the least, physical demand is so strong that lots of gold dealer run out of supply of gold coin and bar. This is not your typical India bride run up the physical demand, since they are mired in the financial crisis. :)

Well, all valid reasons! But wait, why gold still trapped under $1000 peak, which reached March, 2008. All these arguments are truer now than back then. Is the market know something that we don't?

I admit I am not smart enough to figure this out. But what that tell me is Gold's sentiment is too bullish for its own good. Since March 2008, gold's price made no real progress but a wide trading range in the backdrop of this bullish implication. (Boxed in from 700-900).

Now that Gold come up to the high end of the trading range quickly (and overbought in recent days), I will bet the next 10-15% move in gold price is to the downside. I see now is a good opportunities to go short of the yellow metal for a trade.