On December the 2nd, I made a call that I titled “Bubbly Gold: Selling Some”, where I cut our position in the Asset Allocation Model from 7% to 3%. This morning I took the market’s strength as an opportunity to sell the rest. We now have a zero percent allocation to yellow rocks.
Some people say you can’t time markets. That’s probably because they can’t. I know it’s not cool to say you can do things other people can’t do in this business, but in the case of selling the top in gold, I did. Maybe that just means I am lucky. I’ll take that – it’s better than being wrong.
Two of the three Macro Themes that we currently have for Q1 of 2010 are Buck Breakout and Rate Run-up. Both of these macro themes play negative to my long standing bullish case on gold. Inclusive of my thinking that the US Dollar is setting up to chase higher alongside higher Treasury yields, is the reality that the long term TAIL line of support for gold is all the way down at $980/oz.
Currently, gold is trading in a precarious position that puts that $980 line in play – in between its immediate term TRADE line ($1137) and its intermediate term TREND line ($1081). Given my macro themes for Q1, the risk management move is to take today’s strength and sell into it.
This is now one of the most crowded macro trades in all of asset management. For now, I’m out.
Keith R. McCullough
Chief Executive Officer