Looks like a gold bubble

Tuesday, August 23rd, 2011 | Vance Harwood

Monday I pulled up a chart of GLD, and the part of my brain allocated to charting prognostication said, “bubble.”    That unsustainable, exponential growth cries out for a correction.  The tough part is picking when.

GLD 4-Nov-10 through 22-Aug-11, click to enlarge

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The chart for silver looked similar back in April.

SLV 13-Jul-10 through 28-Apr-2011, click to enlarge

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GLD dropped off enough in early action today  to put a sliver of fear into the gold investor’s hearts.   It could be the bursting of the bubble—or a head-fake on the way to $4000 gold.   I bought some 17-Sept S181  puts at $5.50.  Below is how the silver story played out.    If gold’s bubble does burst I wouldn’t expect as dramatic a blow-off.

SLV 4-Nov-2010 though 23-Aug-2011, click to enlarge

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Tuesday, August 23rd, 2011 | Vance Harwood
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  • baruch

    bubble? or too far too fast? The rationale behind gold is a store of value to protect against currency depreciation. That is still there. The only reason to call this a bubble is the explosion in price without a fundamental changing drastically in the same time frame. But that might mean too far too fast. How do you measure bubbles on something that has no earnings, produces no income and has little industrial usage. You can’t. But the fundamental reason for owning gold (and silver) is at least as strong as it ever was.


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