Thursday, September 3, 2009

The "Evidence- of-a-Top-Forming" (ETF) Piles oh so Sky-High

Interesting chart (courtesy of showing Gold ETF inflows over the past few years.

Sentiment is DANGEROUSLY high for the yellow metal at this point.  Just as we patiently await the slow (and most-likely oft-interrupted) not-so-eventually-"killing-us-softly" death of the US Dollar, our long-term philosophy holds strong on gold and silver even more.

That yellow metal will be so stratospheric in price that people will probably regret for all their lives they did not buy it.
But that point is certainly not today.  Why?  Because everybody thinks it is.  Ah, a visual demonstration, you say.  That's just what the doctor ordered!

As you can see, sentiment has been on a roaring trek for over 2 years now, with a 133% increase in gold investment coming in just the last year!

This is probably the last rush toward a top as the final few buyers are suckered in at these prices.

After that expect sentiment to wither away as all of the "Sky High!!" calls are proven false.  And it will wither quickly.  Once gold begins to turn back down people will begin to realize that right now, it's not quite so safe as they had thought.  And they will run to safer (or "Safer", I should say) places yet.

Namely, the USD in the form of US Treasury Bonds.

We should see gold clear down through the low it made last fall.  Once we hit that level, I will be a buyer at the first sign of overextended negative sentiment.  I will be buying gold when people are disgusted with it and think the whole pile of yellow metal is cursed.  When people spit on silver, I will wipe it off and buy it for myself.

It is hard for me to say that.  It really is.  On a philosophical level I believe in gold and silver.  On a moral level I believe in them.  On a "constrain-the-leech-that-is-government-tax-and-inflation" level I believe in them more strongly still.

But belief is what makes losers in markets, dear readers.  Belief is what clouds judgment and lets that pesky part of humanity called emotion into the game.  And emotion means you are running with the rest of the herd, feeling the same things.  We are all human, after all.

To trade, you must become alien.  You must be Gort or R2D2.  The only time you listen to your emotions in markets is so that you can do exactly the opposite of what they tell you.  When you feel cold iron fear running down your spine, that is the time to be looking for your entries.  When waves of euphoria and big smiles are all you see, the sell key should be your best friend.

Do not hold to philosophy, or wants, or hopes, or fears dear reader.  The market makes an Achilles' Heel out of all these things.  Instead, just listen to the market.  Because, remember, the market is people.  Lost and lots of people.

Happy Investing All.  Be prepared for one of the most interesting eras this entire planet has seen in a long, long time....


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