This Gold chart, which I have had in place for a long time, looked ridiculous just not too long ago. Yes it held up longer in a great distribution pattern, but eventually broke down. Sentiment is again low as in bonds.
The paper gold price is leveraged 100:1 perhaps. Why wouldn't it suffer as anything else? Can you redeem a gold ETF for physical? No of course not. So what makes it any different and subject to price delcine? Gold is also subject of random government confiscation and price controls.
Hypothetical scenario: Lets say you bought 100 ounces of physical gold at $1800 = $180,000. Now lets say Gold eventually goes to $500 in a deflationary collapse and the dollar index soars to 200 (lets just say double at 160). Your gold will be worth just $50,000 in nominal terms and only $25,000 or less in real terms.
And god forbid if the government then wants to confiscate it. At that moment in time, you're not a happy camper huh? Refuse to turn in your gold and you may be branded a "criminal". Gah!
I love physical gold but the odds are always stacked against us. The little guy never can seem to win. I am not trying to talk anyone out of their investment either physical or either paper! I am just saying, what you cannot imagine could happen, and may indeed happen. The wave count suggests a major [A]-[B]-[C] decline is on the way. And if you can ride that out, I commend you.
For it is in the future hyperinflation (after the credit collapse) that gold should really shine. But again, it may be outlawed by then.