The above chart of the CBOE Gold Index clearly illustrates a "Head and Shoulders Top" formation. This means we can expect gold to decline about the same distance from the right shoulder that we find between the neck and right shoulder. This places the index somewhere around the 150 level which is about a 20% correction in gold. Make no mistake. The run up in gold has more to do with the strength (or weakness) of the U.S. dollar more than anything else. Sure, the goldbugs will disagree with me on this one. However, the U.S. Dollar is inversely correlated with gold. As we continue to see the Dollar "reflate" we will see a decline in gold and other dollar-denominated assets. Sorry, goldbugs, I don't make up the rules.
Note: The above is for informational purposes only. Any decision to buy, sell, or hold a specific investment for your portfolio should be reviewed with your own personal financial advisor.
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