Skip to content
June 11, 2010 / Jeb

Is Gold In A Bubble? No Way! Classic Cup and Handle Pattern

On the front page of all the media outlets is the question if gold is in a bubble.  I ride bubbles and look for beginning signs of bubbles.  Bubbles are irrational, but there is an old saying that markets are irrational a lot longer than one can stay solvent.

I believe gold is nowhere near a bubble top and believe now is the time to profit on the next major asset class ready to run through finding the strongest mining stocks in the sector.  I use relative strength to find those companies.

Gold is in a classic cup and handle pattern.  The cup and handle pattern has historically led to major market moves.

You can see by the graph the major breakout from the six month saucer on excellent volume.  Notice how the volume dries up on the handle.  Now I expect a major breakout and a run to $136 on GLD or $1375 an ounce.

Compared to other bubbles gold appears flat.

This a chart of the oil index verse the gold and silver index.  Notice the run in oil before the credit collapse.  This run lasted almost 5 years before it topped.  Meanwhile for the past 15 years the XAU has been relatively flat and yet it has had a nice run we have not seen the run up like other asset class bubbles.

I believe there are signs that we may be moving into a peak gold area and would not be surprised if there is a global rush to gold as investors lose faith in fiat currencies.

The recent collapse of the euro only preludes what will eventually happen with the dollar and treasuries.  Now many people have run from the Euro to dollars, but I believe that is temporary.   Now is the time, before the masses rush in, to buy gold and specifically the strongest mining shares which I highlight here.  This is not the time to be bottom fishing other markets.  I believe to stick to strength.   This chart above gives me the confidence to know that we have not entered bubble territory yet.

Advertisements

4 Comments

Leave a Comment
  1. Faik / Jun 11 2010 7:53 pm

    Hello

    Could you please post all of your gold stock picks.

    Thanks!

  2. jake / Jun 11 2010 9:34 pm

    what do you think of GBB.V? very strong looking chart to my amateur eye

    • Marshall / Jun 14 2010 8:02 pm

      Regarding Jake’s GBB, it certainly has tremendous relative strength. But having gone from 6 cents a half year ago, and 3 cents a year ago, it seems highly vulnerable to a severe correction if we become more risk-averse. Management seems reasonably well qualified – not the typical pump & dump promoters you might expect from a stock that has gone up 8X in six months and 16X in a year, without exceptionally strong 43-101 results. Also, for a young company there has been a lot of dilution, over 100 million with much further financing (and dilution?) required. Be cautious, Jake.

  3. cecil / Jun 15 2010 4:38 pm

    yeah what about ung ?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: