Gold $1500 is the Most Popular Trade Amongst Traders

Gold $1500 is the Most Popular Trade Amongst Traders

Gold, the beloved investment pick that is still being heralded as a one-way trade to the moon, is getting some $1500 love from traders.  Bloomberg reports:

Investors are accumulating enough bullion to fill Switzerland’s vaults twice over as gold’s most- accurate forecasters say the longest rally in at least nine decades has further to go no matter what the economy holds.

Analysts raised their 2011 forecasts more than for any other precious metal the past two months, predicting a 10th annual advance, data compiled by Bloomberg show. The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18 percent more than the record $1,266.50 reached June 21. Holdings through bullion-backed exchange-traded products are already at more than 2,075 metric tons, within 0.1 percent of the all-time high.

With China and India reportedly buying gold on every dip – and houses like Goldman constantly upping their price targets – how could you possibly lose money on this trade?

When nobody’s left to buy, that’s usually when price appreciation exhausts itself.  In fairness to gold bulls, it is in a 9-year uptrend, so picking a top at this juncture would argue against the trend.

But with sentiment so prevailingly bullish, I have to think that gold will go lower before it goes higher, at least in the short term.  We didn’t hear any of gold’s virtues being expounded upon by these types in 2000, when it was sitting near 20-year lows at $250 an ounce.  My inclination is to doubt the crowd when it comes to an esoteric investment/insurance policy/form of money like this.

gold price chart and trend september 2010

While it’s been an epic run for Gold since late 2008, a call of $1500 by December is certainly well above the current trend. (Source: