Gold is a market that has been out of bounds for us because it's so volatile. Big swings = big risk. It is very interesting market however, and the big question for us is are market seers George Soros, and Harry Dent correct in calling Gold the last bubble?

The term implies the last bubble following a long line of bubbles - blue-chips, tech stocks, real estate, and commodities -- before a severe, global economic downturn lasting for several years.

In Gann theory, the 7/8ths level, which is where gold finds itself at right now - see gold line on chart -is said to be one of the lower risk areas to take a sell signal from - given one uses a stop loss order.  (Our Gann Lines are anchored to 2000 or 8/8ths and 400 or 0/8s). 

Gold

Gold

Far more reaching though, are the economic implications of a bear market in gold. More specifically a bear market in most financial markets and commodities too.  With most markets correlated so tightly to stocks, the next down turn could be even nastier than usual. The prospects concerned George Soros, and his traders, so much apparently, that they took down the sails, gave their clients back their money, and headed to cash.

The trading environment over the past couple of years has been a challenging one for traders who didn't believe that government stimulus in markets worked. It did work and the two U.S. QE's went a long way in preserving household wealth in the stock market.  The next time the bull rolls to bear though, I suspect there will be a lot less QE, followed by lower lows on a yearly basis across the board.

Trading is a risky endeavor and not suitable for all investors.

To see Jay analyze live markets during U.S. evening hours go to Live Market Analysis. Jay is Chief Market Strategist at IBTRADE and the author of Mastering the Currency Market, McGraw-Hill, 2009.