What the Gold Drop Means

Posted on August 25, 2011 by

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The price of gold has dropped 4.62% over the last two days.

This may be a good sign for the market.

I posted a blog a few days ago about gold. I talked about how the price of gold is anti-correlated as the market overall, and that the recent run up was a consequence of a flight to safety.

The recent drop in the price of gold has some people worried that the gold bubble may be bursting. I’m not in that camp. I think that what we’re seeing is people selling gold to step back into the market. This view is supported by the fact that folks are also selling Treasuries.

However

I will be watching gold closely in the coming days for any signs that the bubble may be bursting. And I will also be trimming my position in gold, mainly because I’m becoming more bullish and want to raise money like everyone else.

disclosure: Tucker Balch is long GLD.

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