Mark McHugh

How Hot is Gold?

In Open Thread on Saturday, February 21, 2009 at 2:31 am

It depends on where you’re from.  Here’s a chart of gold’s 6-months performance in the world’s most popular currencies:

gold-currency-captureChart compiled from data at

The performance of gold has been anemic in terms of US Dollars when compared to the rest of the world, but it looks amazing compared to the 40% shellacking stocks have taken in the last six months.  However, the question  is always what’s going to happen next.


One of the hard lessons 2008 taught me was there are no easy answers, no magic investments, buy and hold is dead for everything.  If you don’t take your profits, someone else will.  Gold is looking like the magic investment right now, but I’m telling you, this is an easily manipulated market that is controlled by the people I trust least, central banks.

I’ve been trying to figure out why I’ve turned so bearish on gold lately.  I mean, I’m a gold bug, for cryin’ out loud!  I think my answer is it’s too easy right now. There’s too many new converts extolling the virtue of gold.  People I don’t like cause they’re always late to the party,  and  I am much more comfortable having opposite positions to.  Walking, talking contrary indicators…

Disclosure: I began hedging my gold positions at $925 and added to that hedge Friday.

Obviously, I hate to be wrong, because it is both embarrassing and expensive, but, I have to say, this isn’t the way I imagined gold’s shining moment.   I was expecting the dollar to drop precipitously, bond prices to collapse, tight physical supply, and inflation, gobs and gobs of inflation.  In case you are wondering, my checklist is blank.  Perhaps these are all things that will all come to pass, but they aren’t happening yet and that bothers me.

Speculators Gone Wild….

2-20-goldspecThe ratio (in blue) is calculated by taking the average price (high + low / 2) and multiply by the volume on both the DGP (double gold long) and DZZ (double gold short) for the previous 20 sessions.  I use it as a way to measure speculative sentiment (flawed as it may be).  In the past year, that ratio rising above 2 (yellow) has coincided with price corrections.  The ratio is currently 3.4.

‘Tis the Season


Get it?

Speaking Volumes…..


Since the GLD was introduced in 2005, surges in the ETFs weekly volume have been a precursor to price declines in the metal (highlighted).  GLD volume has exceed 30M shares two weeks in a row (and that includes a day when the US market was closed).  Of course, there are no perfect indicators, and patterns are only patterns until they change.

Lessons from Carrie

Yes, I’m talking Carrie, the movie.  That should have been a really boring movie about some dork that no one liked, and although her adversaries tried to humiliate her at the prom, Carrie was smart and stayed home.  But noooo, Carrie convinced herself that she could be one of the gang, got all dolled up, and you know the rest….  Well that’s not me.  As a gold bug, I know I’m the dork that no one likes.  And no matter how hard my new friends (Merrill, Goldman, UBS, DB & Morgan) try to convince me that I’m cool now and should go to the prom, I’m staying in the bomb shelter (where dorks belong).  But hey, if you think the thinly-sliced tree crowd has changed their stripes and accepted you for the beautiful person you are, then go.  Have a blast.  Just don’t come bawling to me if it ends like this:


I’ll be in the bomb shelter saying, I told you so…..



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