I am very concerned with the gold price right now. When I look at the GLD ETF I see that today it has issued a 2B sell signal and could be also setting up a bearish weekly divergence between weekly price and MACD.
It is unknown at this time whether this is a major intermediate top that could lead to a 50% 1 to 2 year decline in the gold price into 2012. But I am very open to that possibility now.
Many other commodities are breaking down badly in a very serious sign of deflation hitting the markets. Up until now the gold price has managed to stay afloat pretty well.
Could it be that we are about to enter a very severe case of deflation for the next 1 to 1.5 years going into 2012 and that stocks, commodities and gold will all be taken down with the sinking ship?
I think this is a possible scenario.
I will become more convinced that gold has made a very important top if the SPDR Gold Trust (ETF) (Public, NYSE:GLD) issues a bearish monthly MACD sell signal in the months ahead. That would put a nail in the coffin of the gold market temporarily at least if it occurred.
But for now caution is advised on all gold related sectors including the metal itself.
If the coming deflation gets severe enough it would makes sense that world governments, hedge funds and others would need to liquidate their gold holdings to pay off their debts. And if it happens in cascading fashion then a 50% correction would not be out of the ordinary. And remember, gold has been going up almost in a straight line for 10 YEARS !
In the mid 1970’s, the gold market ran to 200 from 35. From the lows of 2001 that type of move equates to roughly 1450. So with gold near 1250, we are somewhat consistent with this previous phase I big run in gold in the early 70’s.
This could be a very important top here in the gold price and there may be very persistent and swift declines ahead in this market.
The smell of deflation is really starting to get THICK.