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Ask Neubert: The Gold Bubble - A Very Strange Animal

Thanks to Hercial Vitalis for getting back to ranting about the gold bubble again. 

Lately, I've received a number of emails from users with various versions of the same few statements and questions:

1) I own gold and it's going to go up forever - the world economy is coming to and end.
2) I own gold and when do I get out?
3) When do you short gold and silver?

My response? As I've said before, I think gold is in a bubble and will only hold a little at this point.   And bubbles are strange animals, much stranger than bulls and bears.  You never know when they'll pop, I don't like to bet against them.

At $1300, I think gold is overpriced.  But even at $2000 I still wouldn't bet against it.  In other words, don't get in front of a truck going 100mph the wrong way--betting that the driver will turn around can be deadly.  Even if I disagree with the trend, I can't sell short and get in front of this rising gold bull. However, I am already long and ready to sell as soon as I think prices have turned even a bit.  Bursting bubbles burst fast! 

A few axioms about bubbles:
- Markets are easy to predict--as long as you stick with "where" and not "when."
- As we used to say in our daily trading manager meeting, "the market
will always do what hurts** the most people

**The word we used in trading rooms has been changed to protect the families on
this site.  

I own SLV  and GLD .

This is not investment advice--always do your own research.  The opinions of David Neubert do not necessarily reflect those of Kapitall.

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