Bill Cara: Gold rally is extreme, Tues., May 9, 2006, 11:28 AM

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May 9, 2006

Gold rally is extreme, Tues., May 9, 2006, 11:28 AM

June futures for gold has touched $700. The spot price is $697.25. Do not leave your trading screen.

This monthly chart tells quite a story.

Here is one of my gold stocks monitors:

Posted by Posted by Bill Cara on May 9, 2006 11:28:55 AM | Category: Bullion

Discourse

Timing is everything and hindsight is 20/20, but if there is going to be a large gold correction a blow-off top would make sense. This may be it, or maybe we are all just doomed holding our worthless confetti.

Posted by: ihatecnbc2000 at May 9, 2006 11:55 AM [link]

Many commentators suggesting that the gold market is a bubble. I agree there is certainly a bubble on the short side : http://photos1.blogger.com/blogger/7214/1988/1600/OI_SUMa.0.jpg

Posted by: real1 at May 9, 2006 12:20 PM [link]

"real1", I haven't said that the gold trading represents a bubble. Not at all.

A bubble lacks a rationale. Gold trading is moving the price higher for reasons I have been writing about for over a year. It will continue.

But periodically in this very long bull cycle for precious and base metals -- remember I forecast 2006 as the Year of the Metals -- there will be pull-backs.

So what I am saying now is that the metals market is over-heated and ready for a short-term pull-back soon. After a pause to consolidate, I expect much higher prices ahead.

If I didn't think a pull-back had the potential for extreme volatility, I would not have issued an alert. The alert, btw, is for Mom & Pop -- not for day traders.

Posted by: Bill Cara at May 9, 2006 12:31 PM [link]

Pop is scaling back big time. ;) Once you do it, there sure is a lot of angst released.
Blow off??!! Bring it on!

Posted by: C.Note at May 9, 2006 1:22 PM [link]

Who buys gold at $700 the day before a FOMC
meeting? This is insane. $700 is soooo... obvious...

You know, if the Fed does not give a message
against the Gold/Commodities market tomorrow -
this thing could just keep going through
$700 without stopping.

After all everyone is expecting a correction -
but maybe the correction has already happended - with the CNBC viewers absorbing the selling of the "smart traders" - keeping us around $700.

So if there is no meaningful correction - these smart traders (assuming such a thing) will
all buy back in - along with the public - and
it goes to $850 within a few weeks.

Anyone else thinking the same?

Posted by: everyone is saying the same thing at May 9, 2006 1:47 PM [link]

I am guessing you saw my comment on Bill's latest post regarding SOOOO obvious.

One scenario would be a selloff bringing in shorts, then a short squeeze surprising all but us. That squeeze would be huge.

Also, with geopolitical concerns around every corner, who wants to be short gold?

Posted by: g034 at May 9, 2006 2:03 PM [link]

My guess is that Helio-Ben will come accross much less accomodating than most anticipate tomorrow. The FRN will rally, Gold and the stock market will sell off and bonds will actually rally on the FRN strength. This mess has gotton beyond insanity.

Posted by: ihatecnbc2000 at May 9, 2006 2:23 PM [link]

You've got a point there ihatecnbc. Beyond Insanity it is, that's the name of this dance.

With some holdings showing RSI in the high 80's, taking those chips off the table. Still maintaining weakening dollar plays as it's in a spiral only to pause for awhile after Ben speaks.

Mama told me there'd be days like this!

Posted by: Seamus at May 9, 2006 3:09 PM [link]

Dood, everything is completely out of whack. If I had it my way, myself and my family would "head for the hills." I hope we get a steep correction in the fizz just to make things seem a little more orderly/rational. This high stakes game of poker that our country's "leaders" are playing is not for the timid and will most likely lead to a he-who-loses-the-least-wins-the-most scenario unfolding. Community will be key.

Posted by: ihatecnbc2000 at May 9, 2006 3:30 PM [link]