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Guest Post: Gold A Bubble? Think Again!
Submitted by Global Macro Monitor
Gold a Bubble? Think Again!
Think gold is a bubble driven only by animal spirits and speculation? We think not and have consistently maintained
the fundamental driver of gold has been the massive accumulation of
foreign reserves by global central banks and their need for
diversification.
Nothing illustrates this better than the chart below. We have
included the table to illustrate how much gold China and Brazil would
have to buy to get to the same proportional gold position as their
fellow BRICs, India and Russia.
We calculate the “global monetary base” as the sum of central bank
reserves less gold and the U.S. monetary base. Notice, the gold price
broke out in late 2003 along with every other commodity and asset,
including housing prices.
The Fed takes a lot of heat for its role in fueling the past bubble
but foreign central banks played their part through depressing their
currencies, accumulating reserves, and recycling the dollars back into
U.S. markets. This created a very powerful positive feedback that drove
every asset to the moon and pancaked market and implied volatility.
Our view is that investing in gold is a journey and not a
destination. There is no right target price for gold or a fair or
fundamental value for the yellow metal. When the major central banks
are maintaining a zero (or close to) interest rate monetary policies and
foreign central banks are accumulating reserves at a rapid clip, the
trend in gold prices is north.
In a tightening mode or when foreign central banks stop accumulating
reserves the trend will turn south. Until then, all else is noise and
we will be buyers on the “french” dips as the bubbeistas provide the
opportunity. We were hoping gold will move back to its 200-day moving
average to provide us a nice reentry. We’re not so sure we’ll receive
such a gift, however.
One last point. Gold is a relatively benign “store of value” as
opposed other commodities such as crude oil, copper, and foodstuffs,
which have negative economic and societal consequences during price
spikes. We believe we’re close to “tipping point” prices in some of
these commodities. If central banks have been buying them, say, though
their sovereign wealth funds, for example, we think they may pull back a
bit.
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Based on your tired old argument, I can tell your kinda new to this gold thing, aren't you. Don't forget to add, you can't eat it either.
You can't eat gold. But I have a future vision of a lot of banks eating a lot of mortgages.
Of course, the taxpayers will be supplying the sauce.
Something must be up with all the new anti-gold posters snaking around. Desperation maybe?
Cool. Let's get mean with each other. My bets are that the BATF will be completely decimated in under a month and homeland security will be hiding in walmart stock rooms before summer.
People will be overwhelmed by the force for a short time but losses will mount.
Is owning gold any different than owning Apple stock? Will it ever be a medium of exchange? As long as it's worth is measured in dollars it will be what it is. Another asset. You stupid permabears will be owning until the end of the fucking world. Which may be next week , next year or the year after you die, but as long as gold's worth is measured in dollars, you're still fucked.
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When Apple stox and dollars are both worthless paper, gold will still buy you stuff from stupid people like me.
For one thing, you can't make a decent cock ring out of an Apple share certificate.
You've tried?
Check out my website:
http://www.metafilter.com/63966/Pure-solid-gold-cock-ring
The real secret is to make an escape mechanism that doesn't interfere with the lovemaking, whether with a partner or oneself.
And it has to be functional. The last thing you want is necrosis caused by priaptic tumescence. Very painful, potentially fatal, and damned tough to explain in the ER.
But ours are quality 18 karat alloy with a platinum latching mechanism.
Try THAT with a fucking Apple stock certificate!
Dear Im not realintelligent,
Thank you for playing.
You may now return to your macaroni, paste and glitter.
Just don't eat the paste this time.
Gold in a bubble? Comical.
Alert to Pakistan
So according to your theory, the U.S. monetary base and central bank monies are not in a bubble??
If you look also at the CRB uptrend, the speculative positioning in commodities and the rush to ETFs (the next dot com), then you really can't deny there's a speculative element.
2008s collapse was a sneak preview of what will happen if the reflation of the exact same bets unwinds.
Other than that, your only hope is hyperinflation/dollar collapse. There's better hedges for those events.
I'm reminded of Disraeli who said (to paraphrase): If every Chinaman would lengthen his shirts by 1 foot, then all the looms in England would be kept busy to the end of time.
Anticipating to make money off of China's actions has usually resulted in disappointment.
Tyler,
The Gold vs Money supply chart is out of scale. To put it back in scale go back to the Gold peak price in 1980. Take that one point and line it up with the money supply at that same point in time. The Gold price briefly matched the money supply in 1980.
Putting the chart in scale will then take the current money supply portion and send it far north of the current Gold price. Adrian Douglas has calculated that the two would meet at $56,000!
https://marketforceanalysis.com/resources/Published-Articles/Proof-of-Go...