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By my math (using my immediate term duration model), gold has now had a 3 standard deviation move. While “Fast Money” may indeed buy high here in hopes of selling higher – hoping and praying is not an investment process that is repeatable. If I am right in that the US market is setting up to lock in another higher low, the last thing you want to be holding at this level in the SP500 is a bag full of gold.

Below I have painted a dotted red line whereby you can short Gold for an immediate term “Trade” – at effectively any price north of $973/oz, the risk associated with being short gold actually goes down, in the immediate term. You can cover at the green dotted line ($927/oz). This isn’t a huge projected return, but it pays for lunch.

I understand and support the bullish case for gold as a safety currency – I have been pitching that for the better part of a year. The intermediate “Trend” line of support for gold is all the way down at $886/oz however, and we need to be mindful of that. I will likely buy it again down there, if I am so lucky to see that price. In the meantime, don’t confuse the hype with the reality of the math. Gold, right here and now, is overbought.

Keith R. McCullough
CEO & Chief Investment Officer