I also get nervous when CNBC is touting gold. However, this is primarily a dollar story. Please have a look at the chart I've posted below. This is the third time the dollar has been unable to break the downward trendline. If the current trend continues the DXY will break 80 no later then December 2007. This may cause massive panic since it is a major psychological level.
Seems you only hear what you want to hear. You're way too early with your predictions about the end of the gold rally. Almost nobody is buying gold now, and a full mania will still take years to develop.
I agree. We could see $1200 gold in a few years. Conversely at the commodity bottom (oil at $11/bbl and gold at $200) I couldn't give the stuff away. At the exact bottom I was chatting with a wealthy investor and said I think oil and gold are screaming buys. He said emphatically I don't own ANY!!! But then again it took a few years to really gain traction and traction it has which although many who were in early are selling into the spikes up it may take awhile to actually run its course.
I believe the Dow/Gold ratio will return to one, as it was at the previous gold price peak. Or at a minimum, below 2. That would mean a 10-fold (or more) rise in gold vs the stock market.
I doubt that the peak in the gold market has even been seen. With that said, I think once we hit 750 we see 450-550 again for sure. But, I have no way of knowing. So when prices are favorable, you can buy more. I agree by the way - nobody is buying this stuff yet in any significant way. Mom and pop are just getting their heads off of real estate and starting to look for the next bubble.
Doing a correlation chart between the dollar index and gold will show that it is NOT a dollar story anymore.
Obviously the correlation between gold and the US dollar is weak on a day-to-day or tick-by-tick basis, but quite strong when looking at longer-term price trends. As you can see in this chart Gold does tend to foreshadow movements in the $DXY.
But as of late, it's begun to unwind itself. Evidenced in the spike in your chart. That's what I was referring to.