Most of you probably know how bubbles usually work.. don’t cha cowboy?
The stealth phase where smart money accumulates and no one is really aware of.
The awareness phase where institutional investors get in, and you have most of investors around the world that are aware of the bull market.
The Bear trap before the Mania phase.
The Mania Phase where your cab driver and your Mother have all the 401k invested !
BubbleStages
But a few question remains at this point regarding Gold :
Does everybody really believe in it longer term ?
Does everybody think it will go higher ?
Does everybody believe that it will never ever go down again so that they put all of their 401k in it ? I’d say not quite yet.
I really think that we are at the late stage of the awareness phase of the Gold bubble, where everyone agrees that it’s a Bull Market. However I doubt that everyone believe that it could go much higher ! The same way investors did not believe that the Nasdaq could go higher in 1998 after it collapsed something like 30% in a bout 4 months!
Trust me kids, I started trading in late 1997 and was “aware” that the Nasdaq was indeed in a bull market, however the mini crash in late 1998 that send the Nasdaq tumbling from 1900 points down to 1350 did indeed feel like the Bull was ending. I remember very well how some major technology companies such as YHOO,AOL,AMZN fell something like 50% in a few months from July 1998 to October 1998.
At that point in time i thought that the Bull market in the Nasdaq was over…
What do you think it was in fact ? It was in fact the biggest Bear trap you could ever imagine.
The whole technology sector rallied from October 1998 until March 2000. From 1300 up to 5000 which represents the Mania Phase.
Why am I bringing this up ?
Because i think we are seeing some similar phases in Gold.
Everyone think it’s a bull, but don’t you think that a mini crash from $1800/Oz down to $1250/Oz in several months will definitely make everyone believe that the Bull in Gold is over? Of course it will !
Sentiment in Gold will reach extreme low levels.
This is when you will see the biggest Bear trap in this Bull Market in Gold that will set the stage for the Mania Phase.