5 Warning Signs of When the Gold Top is Forming

Bill Fleckenstein of the Contrarian Chronicles has put together a tongue-in-cheek list of the five key indicators that will predict when the gold trade has become overly crowded. Here they are…

* Goldman Sachs will be running bus tours to visit gold mines, like they’ve arranged for technology companies in the past.

* Instead of TV ads telling people to sell jewelry, we’ll see ads on CNBC hawking gold to the masses.

* Banks will have found some highly complicated scheme for gold investing, “because no modern mania has ever ended without the banks finding a way to lose money in it.”

* There will be a flurry of mergers and acquisitions, and one or two leveraged buyouts for good measure.

* BusinessWeek will discover that gold is “the wave of the future” and feature it on its cover.

As Fleckenstein puts it, “most of these events have occurred before a big mania has ended — be it energy in the late 1970s and early ’80s, stocks in the late 1990s or real estate in the middle of this decade.

So it seems to me that what’s crowded is not the long-gold trade but more likely the camp of folks who think it’s too crowded.”

More of his thoughts on gold, including the recent Mauritius central bank purchase of gold and the Icelandic krona and Latvian lats rally against dollar, can be found in MSN coverage of how much longer gold can rise.

The Daily Reckoning