Will gold go down to $800?

Thursday gold was valued at $1200.  I made a $100 bet with a trading buddy that it would fall 400 points to $800 before it rises to $1600.  He is bullish on gold, I’m personally bearish. 

My reasons are as follows. 

1. Housing starts are increasing.
2. The job market is on the rise.
3. Economy appears to have bottomed out.
4. Carry trades will unwind at an unprecendented pace once the dollar starts to rise and traders have to cover their shorts.
5. If you drive down any commercial area in a neighborhood where the median house price is under $100k you see all these Cash 4 Gold stores.  You know you have seen them, “We buy gold”, “Sell us your gold”, “Get top dollar for your gold”, etc.  This in my opinion is a sign that everyone has caught on to this trend.  Since all the buyers are on one side they are burnt out.  Now we will see a violent reverse.

With these supporting factors and the fact that banks will be paying back TARP at a faster rate then initially anticipated I feel gold will drop dramatically.  People invest in gold during times of economic turmoil.  Since I feel the worst is behind us I predict people start unwinding their positions.

1 Comment for this entry

• 

  Jeffrey

  January 25th, 2010 on 8:45 am

  800 is coming!