There are many names being assigned to what is happening with gold bullion right now. There is an argument that gold is blowing off in a parabolic manner, not unlike the Nasdaq in 2000. There are also gold
bugs bulls who insist that gold is merely short-term overbought, but still headed much, much higher.
A few thoughts from my vantage point:
- No one knows for sure if gold is actually blowing off at the end of a multi-year bull run and making a MAJOR top.
- If gold is going truly parabolic here, then it can go MUCH MUCH HIGHER before the bubble bursts, which means that there is significant risk to shorting gold here without a sound exit strategy to the trade.
- A look at a zoomed out weekly chart below of GLD tells me that the angle of ascent has clearly changed and is now essentially up in a straight line.
- Putting on a long swing trade here in gold is not a high probability idea, and offers a terrible risk/reward profile, with the risk of a quick and fierce reversal too high.
- In light of these points, swing traders should probably take a hands off approach to gold for now. Again, if you choose to short it, have a clear stop-loss price in mind as a further move higher is a distinct possibility.