Traderneal the Contrarian

In my previous post I indicated that the attendance at the gold show was light and that I thought it was a good sign for the gold market. I received a few questions as to why I thought that.

I was only at the show for thes second day, and like I said having attended these shows for the last five years both in NYC and Vegas, the attendance looked very light to me compared to those other five years. Normally, the first day of the show is the heavy day, but I have heard that attendance that day was just "ok."

Whenever one is an investment for the long term, no matter what it is, when that investment gets really going, the late money starts pouring in trying to catch the move. This late money is always the quickest to bail as it is usually the small retail investor hopping in.

In gold, as the late money sells, it creates a waterfall effect as the stops are hit and the price drops dramatically. (Like we had from $1030 down to $850.) Also, if you are in an investment like gold for the long term, you want it to be a quiet party and you don't want the unwashed masses in for as long as possible, for exactly the reason as what happened; the price drop.

So, gold hit $1030, was all over the mainstream media and these shows were packed, does that sound like the "ideal" investing opportunity? Flash forward two months; gold is down to $870ish (the days of the show), out of the spotlight and the show was lightly attended. Yet, and this is the important part, the FUNDAMENTALS TO BE IN GOLD HAVE NOT CHANGED ONE BIT!!! You will see the price move higher as the stronger hands start taking over. That is why it is a contrarian sign. I only want the unwashed masses involved in gold, when the fundamentals no longer apply as to why gold should go higher. I want them pushing the price to an absurdly overvalued level. In other words, when all that happens, I need someone to sell my gold to. When what has happened over the last two months, I need someone to buy gold from.