[Lou's quotes taken from Nader on Kitco]

Lou Basense says:

Let me start off with a morsel of clarification. I don't hate gold. I own it, or more accurately, an interest in gold via gold mining shares. And I believe a small allocation (5% to 7%) has a useful place in a well-diversified portfolio. ... But over the short-to-intermediate term - the next six to nine months - I think gold is a terrible investment. After breaching the $1,000 per ounce mark again, as I suggested would happen to my subscribers on February 2, it is overdue for a retracement back to roughly $700 per ounce.

Sure your "Cousin Vinnie" as chronic poster Todd opined, the trash collector or the newspaper boy might not be investing in gold. But the rest of the lemmings certainly are:

Investments in coins and bars increased 811% in the fourth quarter, according to the World Gold Council.

my answer: Many are selling from their ETF to buy physical. If the increases you site here are true for both ETF and physical, then gold should be much higher today.

Headlines abound in the mainstream press like this one from The Financial Times - " Gold primed to be a ˜mania asset."

answer: They don't abound, in fact they are relatively new. One year ago you couldn't find a serious article on gold. One year ago there was no financial crisis.

Wannabe gold bugs are paying - willfully I might add - 20% premiums for coins and small bars. Forget buying gold, we should all become coin dealers!

answer: Tulving charges 5-10%. By wannabe I think you mean new investors. It takes time to learn where to get the best for your money, but not long.

Investors - like teenage girls at New Kids on the Block concerts in the late 1980s - can't reach out and touch the SPDR Gold ETF (GLD) enough. It's now the second-largest ETF in the United States with a market cap of roughly $33 billion. With more than 1,000 metric tonnes of gold, speculators now control more gold than many industrialized nations. If that doesn't scream "out of whack" I don't know what does. Many of you respond by saying the investors here are institutions, so the inflows are not indicative of a top. You're wrong. Individuals, according to Morningstar, accounted for an estimated 60% to 70% of the investments in the last four years.

answer: Four years ago most people were not investing in Gold. One year ago many smirked if you mentioned gold. Gold is just now going mainstream.

Gold $1,000 one year ago? Who was buying gold then? It now hit $1,00 for the second time. This fact doesn not spell mania, it spells deliberate and careful entry.

The world's largest gold refinery is pumping gold coin blanks at a rate not seen in 23 years, according to Bloomberg.

Answer: more people want physical gold.

Reuters

Answer: This is the largest single reason the gold bull has just begun. There is not enough gold available for every investor to have 5%-7% allocation in gold.

If you're a newsletter junkie, like me, no doubt you also noticed the sudden explosion in "gold experts" that have some overlooked, stealth play on gold you need to consider. It's poised for 500% gains (or more), they say! All you have to do is read a 16-page teaser and sign-up for some newsletter. Marketers tap into what's hot, typically as a trend is cresting. Don't expect this time to be any different.

answer: Cresting? Remember 'Dow 36,000'? Remember people flipping three houses in five years and doing very well? As to gold, we have only just breached a high achieved one year ago!

From today's Wall Street Journal, futures investors are taking delivery of gold at more than double recent levels (4.5% versus 2%). Paranoia anyone?

reports investment consultants are now advising pension funds and high-net worth clients to invest 5% to 7% percent allocation toward gold and gold stocks. After being an investment consultant to such clients, I can confirm such allocations are new. And will be followed, if they haven't been already.

answer: Paranoia may be good sense. Where is all the gold coming from to supply both physical demand and ETF demand?

Lou may be a contrarian, but he is actually a short term contrarian looking for a pullback to $700. He is not predicting Gold's demise. He is only speaking of the 'short to medium term'. That's because if gold gets anywhere near $700.00 the number of people pilling in will cause a super ball bounce up well past the $1,000.00 mark. don't get caught short.

I believe the real reason for a Gold pull back is the same reason we had in November - hedge funds and others houses facing liquidations need cash.

BK