Sunday, February 22, 2009

Is gold topping?

This seems to be the general consensus everywhere I look. It seems like everyone has noticed that gold is overbought and somehow that means gold has topped out. Don't get me wrong, it is entirely possible that gold has gone as far as it's going to go.

I just wanted to point out a few things. First off overbought doesn't necessarily mean top. Just go back and look at the breakout in 07.

Next, I want to take note that gold has now closed over $1000 for the third time in history. It's only a few dollars from closing at all time highs. Gold is already at all time closing highs on the weekly and monthly charts. Granted the month isn't over yet.

The COT isn't especially negative on gold yet and silver is still extremely bullish.

Gold has been moving steadily higher since Nov. I'm not really sure what's bearish about that.

Gold is still in a secular bull market.

The 50 day moving average has crossed back above the 200 day moving average and the 200 day moving average is turning back up.

Silver is forming a powerful rounded base. So are Platinum and Palladium.

The mining stocks are still stupid cheap compared to the price of gold.

The junior sector is exploding for the first time in quite a while.

Volume has been very heavy in the ETF's and mining stocks in general.

Other than biotech, which is questionable, precious metals are the only bull market in town so to speak.

As far as I can see the miners are the only sector that has improving earnings potential. The price of their product is going up and their expenses are coming down. I don't think we can say that for just about any other sector.

So sure gold could top anytime but until it does it seems like a waste of energy to try and pick a top. I think the greater danger is if gold breaks out of the year long consolidation above $1000 and enters the next phase of the bull market and one isn't on board because they were worried about an overbought oscillator.

Ultimately gold will finish the secular bull market no matter what the dollar or Euro or any currency does. So even if one doesn't spot every short term top correctly the overall trend will eventually correct any timing mistakes. That is if one has the patience to let the bull work for them.

More in the weekend update...