Interesting article on gold

http://www.marketwatch.com/story/new-gold-bugs-taking-gold-mainstream-2009-11-23

This talks about how gold is now becoming "mainstream" as some legendary hedge fund managers have now embraced gold. One quote from the article I found interesting was this "I can't remember in 20 years so many respected investors focused on a single strategy". Wow! If this doesn't scream immanent LT top I don't know what does! Here's a question I would ask...where were these "respected investors" 5 years ago? Never mind buying at the bottom in 1999, how come they weren't buyers at $400, $600, or even $800 in the years that passed? Only after 9 years run and a 3 fold increase in the price of gold have we now seen these "legends" buy into gold. lol! That doesn't seem to be very legendary to me and it tells me to be alert for a LT top in gold. Remember, the motto of this blog applies to EVERYONE legend or no ledged...actually, it applies EVER MORE to the legends....the bigger the ego and reputation the more the market seeks to humiliate such people. The operators of LTCM were the best of the best and yet they went bust.

You have to keep in mind this - at a LT top 3 things tend to occur

1) The asset in question will have made a tremendous multi-year move quite often showing a parabolic type chart pattern.

2) The fundamentals still appear to be very favorable for the trend to continue. It has to feel like nothing can stop this trend from reversing.

3) The buying power of all potential investors has been used up. You can tell that this has taken place when investors who normally don't invest in the asset jump in. This is what happened with the tech bubble when conservative investors both retail and professional alike threw caution to the wind and jumped on to the bandwagon...those were the last "greater fools" available to keep the bubble going. Once most people are in who are they going to sell to such that they all make money? It can't happen. We may be at or close to this point with gold. Notice this quote from the article "A surprising number of level-headed folks, who I have known over the years, are confessing to me that they've become gold bugs," he said. "They're starting to give more respect to what was for a long time considered the lunatic fringe." This is reminiscent of the tech bubble.
I made mention of this before....the "pros" who scoffed at gold when it was $300 now love it at $1100. This shows that we may have reached the point where most of the potential buying power has already been committed with some people I'm sure waiting to buy on the dip. Either way, I get the sense that too many people are leaning one way with gold or at the very least an IT top for gold is imminent.

I always respect that the market can go a lot further than you expect it as well which is why one should be careful betting against a strong trend especially an upward trend because unlike trying to pick a bottom where you know the price can only go down so much (with $0 as the limit) there is no limit as to how high something can go.