Everywhere you turn, people are talking about gold.
Here in the West Palm Beach area, I see at least two or three people every day standing on various street corners with signs that say “We buy gold.”
I have had other parents talking to me at the bus stop asking me how high I think gold can go. Notice the phrasing of that question: "How high can it go?"
They aren’t even considering that gold could go down before it moves higher. The sentiment is extremely bullish at this point.
This is concerning to me, especially when I look at how overbought gold is on the weekly and monthly charts.
Looking at the weekly chart for gold, the 26-week (half a year) moving average seems to be the one trendline gold has used as support the most over the last three years.
The problem is that the price of gold is almost 15 percent above the 26-week moving average.
The last time gold got this far above the moving average was in November 2009, right before the price slipped approximately 12.5 percent over the next two and half months.
I look for gold to pullback over the next few months and use the 26-week moving average as support once again.
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