When I start hearing headlines like “Euro Set for Biggest Weekly Drop in 3 Months” and “Gold Rout Thins the Herd of Bulls” I can’t help but think there is a short term contrarian play here. Everyone has been waiting for the gold bubble to burst for so long, and as I discussed Tuesday, I believe it may in fact be bursting, but I also think the decline has to take a short breather after the quick declines. There’s always the risk that the decline in gold prices could be causing some folks to get margin calls, which means they may have to sell more gold to meet the calls thus becoming a dangerous cycle.
If I haven’t missed the opportunity already, I’ll be watching Friday for an entry point on a short-term gold bounce-to-the-upside play. Subscribers will know if and how I trade. Stay tuned and be ready!