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34 Years Ago Today, Gold Trading Reached "Delirious Proportions"

Tyler Durden's picture




 

On this day in 1980, after more than doubling in the prior month, gold prices peaked amid "trading that reached delirious proportions" at a record $820. Between The Hunt Brothers precious metals miasma and rumors that the Soviet Union had invaded Iran, one trader at the time described gold's bull run as "like going to a strip show knowing the place is about to be raided." The exuberance described in the WSJ's headlines below echo so strongly forward into the current "buying opportunity" that any dip represents in the US equity market... and just as it is never different this time, the WSJ reported, "no one wants to leave until they're sure the party is over."

 

34 Years ago today from the WSJ...

 

 

Ring any bells with the current exuberance in US equities?

 

Just as John Hussman has prerviously noted...

Based on the fidelity of the recent advance to this price structure, we estimate the “finite-time singularity” of the present log-periodic bubble to occur (or to have occurred) somewhere between December 31, 2013 and January 13, 2014. That does not mean that prices must immediately crash – only that the dynamics will then lend themselves to a great deal of potential instability, if prior log-periodic bubbles in equity and commodity markets across history are any indication. It bears repeating that our own defensiveness is driven by a broad ensemble of evidence, not simply price dynamics, not simply valuations, not simply sentiment, but the “full catastrophe” – which includes the fact that strong economic, speculative and monetary enthusiasm has historically been quite a contrary indicator for stocks.

 

The chart aboveshows the current position of the S&P 500. The light red line shows the log-periodic price trajectory that most closely approximates the present overvalued, overbought, overbullish, Fed-induced speculative run since 2010. While the initial gains from the 2009 low until about mid-2010 represented what we view as a move from reasonable valuation to full valuation (our stress-testing “miss” was not on valuation grounds), I expect little, if any of the market’s gains since 2010 to be retained by investors over the completion of this market cycle 

 

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Sun, 01/19/2014 - 16:06 | 4346484 Sudden Debt
Sudden Debt's picture

so in 34 years there's about 50% inflation if you look to current prices of gold... I doubt at...

Sun, 01/19/2014 - 16:29 | 4346528 seek
seek's picture

1 gallon of gasoline in 1980 = $0.86. Currently about $3.20 here, so 272% inflation in gasoline.

1 pound of ground beef (in 1984, when BLS started tracking) = $1.29. Current: $3.58, so 177%.

And so on. 200%, and even 300% inflation is easily justifiable. I wonder how you hedonically adjust BTUs and shitty protein sources?

Sun, 01/19/2014 - 17:09 | 4346619 I Write Code
I Write Code's picture

I make inflation much higher than that.

34 years @ 5% inflation would be 170% simple, which is about 2x * 2x * 1.5x = 6x.

Housing prices more like 10x.

Sun, 01/19/2014 - 17:46 | 4346685 seek
seek's picture

Oh, I agree. I'm just using BLS' own data to show that 2-3X 1980 pricing is a given.

Sun, 01/19/2014 - 17:55 | 4346702 akak
akak's picture

My rough estimate, based on having been alive and aware in 1980, would put the figure at around 3.5X.

Of course, the BLBS claims something like 2.3X.

But who should I believe, the BLBS or my own lying eyes?

Of course, former ZH poster JimmyJames would claim otherwise, as according to him "constant inflation-adjusted prices prove that there is no inflation".

(I NEVER get tired of that one!)

Thu, 01/23/2014 - 16:40 | 4360114 MeelionDollerBogus
MeelionDollerBogus's picture

1.05 to the power 34? 5.2533479691354743637682410387978
5.25x for short...

Sun, 01/19/2014 - 19:24 | 4346871 JimS
JimS's picture

As a sophmore in HS in 1964, I was buying gasoline at $0.20 per gallon (as in 2 silver dimes). Today, I can still buy a gallon of gas for 2 silver dimes. I'd say silver has held it's value quite well. Gold has done even better.

Mon, 01/20/2014 - 09:28 | 4347818 TerminalDebt
TerminalDebt's picture

I'm surprised you're not downvoted for contradicing the widely held zerohedge theory of undervalued gold and silver.

Sun, 01/19/2014 - 16:31 | 4346531 TeamDepends
TeamDepends's picture

TD prediction:  By summer we will have broken into a full sprint, passing "Delirius" on our way towards "Orgasmic Proportions".

Sun, 01/19/2014 - 16:55 | 4346591 Winston Churchill
Winston Churchill's picture

I remember back then well.

Gold was in a bubble for a while,everybody was buying it.

A true mania for a while.on the fundamentals it shouldn't have gone over $500 or so.

How does that work for your inflation adjustment ?

Sun, 01/19/2014 - 21:43 | 4347164 Vint Slugs
Vint Slugs's picture

S&P Now = arithmetic scale; Gold then = log scale.  What's Tyler's point?

Sun, 01/19/2014 - 16:09 | 4346493 CURWAR2012
CURWAR2012's picture

MEGAphone pattern on the S&P, very telling

 

Sun, 01/19/2014 - 16:44 | 4346565 Papasmurf
Papasmurf's picture

Can you post a chart?  I don't see that.

Thu, 01/23/2014 - 16:34 | 4360093 MeelionDollerBogus
MeelionDollerBogus's picture

"patterns" without math, megaphone, cup and handle, elliot wave, unicorn straight flush, mean nothing.
They fail backtesting & predict nothing as they have no equations.

Sun, 01/19/2014 - 16:12 | 4346495 Sudden Debt
Sudden Debt's picture

so the s&p had a sideways patern o4 to 5 months before every crash. To soon to go short right now so it seems...

Sun, 01/19/2014 - 16:12 | 4346496 Sufiy
Sufiy's picture


There Is No German Gold Left At The New York FED


Die Welt has reported today the bombshell announcement for the Gold market. We have discussed before that only 37 t of Gold out of 674 t was delivered to Germany in 2013 and that the Gold bars were Melted. So not a single original German gold bar was returned to Germany so far!    ZeroHedge reports today that surprisingly only 5 t of gold has been delivered from the NY FED - the rest came from Paris. Now it is not be the conspiracy theory any more that there is no German Gold left at the NY FED.   Now all the manipulations in the Gold market and constant smashing down the price in 2013 are coming into another perspective. Germany is very serious about the investigation of the manipulations in the Gold market it was already reported thatprecious metals manipulation is worse than LIBOR scandal.  This investigation has already claimed the first victim: Deutsche Bank to withdraw from Gold fix amid probe.
  With the highest on record leverage at COMEX of 112 owners for every single ounce of Gold and record low COMEX registered Gold at 11 t we have the set up for the major blow out phase in the Gold market. Who in their mind will continue to hold Gold at LBMA any more? According to Eric Sprott, we can expect a failure to deliver Gold and lawsuits with deliveries last February from COMEX of 40 t and China buying at least 100 t of Gold every month on average now.
  Once Gold will breach $1270 level Andrew Maguire's discussion about the massive short squeeze will become the reality and even if his predictions about $200 Up-days will not materialise, the move by Gold to the upside from the most oversold condition in history will be nothing less than spectacular. http://sufiy.blogspot.co.uk/2014/01/there-is-no-german-gold-left-at-new....

Sun, 01/19/2014 - 17:12 | 4346628 The.Harmless.Who
The.Harmless.Who's picture

 

Folks,

 

Regarding the German Gold "Situation" , with thanks to Die Welt. 

 

Bundesbank should let check their gold for authenticity 

http://www.welt.de/finanzen/article112766807/Bundesbank-soll-ihr-Gold-au...

The big blow to the wild gold-myths 

http://www.welt.de/wirtschaft/article112804191/Der-grosse-Schlag-gegen-d...

The whole truth about the gold of the Bundesbank 

www.welt.de%2Fwirtschaft%2Farticle123988843%2FDie-ganze-Wahrheit-ueber-d...

 

Your browser should offer you the option to translate (from German to English).  

 

Good luck folks!

 


Sun, 01/19/2014 - 16:15 | 4346504 Count of Lastovo
Count of Lastovo's picture

A quote from a 1924 edition of the American Banker's Association not intended for the public sums up what is currently happening all around us:

  "Capital must protect itself in every possible way, both by combination and legislation. Debts must be collected, mortgages foreclosed as rapidly as possible. When, through the process of law, the common people lose their homes, they will become more docile and more easily governed through the strong arm of government applied by a central power of wealth under leading financiers. These truths are well known among our principal men who are now engaged in forming an imperialism to govern the world. By dividing the voter through the political party system, we can get them to expend their energies in fighting for questions of no importance. It is thus by discreet action we can secure for ourselves that which has been so well planned and so successfully accomplished."

Sun, 01/19/2014 - 16:36 | 4346541 Skin666
Skin666's picture

Do you have a source for this quote by any chance?

Sun, 01/19/2014 - 19:31 | 4346881 Count of Lastovo
Count of Lastovo's picture

Thank you Ratscam.   I should have given the full reference when i posted.       

I found the quote referenced in "Vile Acts of Evil -Banking in America" p.163.   It was taken from the Amercian Bankers' Association Digerst 1924 repeating the "high" points of their 1892 Bankers' Manifesto.  

 

 

Sun, 01/19/2014 - 20:12 | 4346961 Urban Redneck
Urban Redneck's picture

That looks kind of iffy...

The Jefferson quote is incorrect (for the nuances, see http://www.monticello.org/site/jefferson/private-banks-quotation)

also

The ABA and American Banker are certainly not the same thing. Although I wouldn't put that level of arrogance past American Banker, I think they would have worded it more discretely. Then (from the other post) Amercian Bankers' Association "Digest" is going someplace weird (also see http://www.worldcat.org/title/american-bankers-association-journal/oclc/...)

Sun, 01/19/2014 - 16:17 | 4346508 frankTHE COIN
frankTHE COIN's picture

Parabolic. Short it. And do it quickly.

Sun, 01/19/2014 - 16:32 | 4346534 FieldingMellish
FieldingMellish's picture

Probably too late.

Sun, 01/19/2014 - 16:44 | 4346566 GrinandBearit
GrinandBearit's picture

666 was the low, so it would not surprise me if SPX top-ticked at 1929... the year of the great crash.

TPTB love playing games like this.

Sun, 01/19/2014 - 16:50 | 4346574 Kirk2NCC1701
Kirk2NCC1701's picture

The financial problems for the masses and ZHers will be bigger than the daily Gold Debate.

CA is experiencing a record drought.  Even Oregon's snowpack is way low.  Experts expect a 20 year trend toward drier conditions in the West.  Expect FOOD INFLATION in 2014, which means that the poorest will get hit the hardest.  Think of the Domino effects...

You're better off expanding (or building) that backyard garden, than expanding the coin collection.

Sun, 01/19/2014 - 16:58 | 4346596 Winston Churchill
Winston Churchill's picture

I'm doing both, thanks.

Thu, 01/23/2014 - 16:17 | 4360033 MeelionDollerBogus
MeelionDollerBogus's picture

May be, it's what I'd expect with the absolutely proven global warming, however, a certain (Mon)Satan is telling farmers to forward-sell very soon because yields of crops should be "record highs" in the next year or two... dunno

For that garden I'd recommend http://www.youtube.com/ldsprepper

Sun, 01/19/2014 - 17:04 | 4346610 akak
akak's picture

Waiting for Chindit or some other anti-PM naysayer to make the specious argument that gold has only risen ~50% (nominal) since its (momentary) peak in early 1980, so therefore "gold is a poor inflation hedge".  It's as inevitable as the sunrise.

Sun, 01/19/2014 - 17:30 | 4346658 lewietheparrot
lewietheparrot's picture

I don't know about the S&P, but

if you overlay this chart on the weekly gold at netdania

it looks like, to me, that gold has more downside

like, maybe , $700 or so

this doesn't make any sense, does it?

oh, yeah-----i'm long the fizz

insurance for my old age

Sun, 01/19/2014 - 18:29 | 4346761 drinkin koolaid
drinkin koolaid's picture

Just for accuracy, the intraday high was Jan. 21, not today. And the  high was $850 for the gold "fix "(apt word). Intraday futures high, from what I'm told by my buddy"s father who was on the floor that day trading was $895.

To AKAK's comment above, gold is not a good inflation hedge, except for when it is, so both sides are wrong and right, just depends on the timing. Timing is everything in life, even more so in markets. Just like all markets, you can't sit on your ass in gold forever. Take profits at times into extreme strength, buy back into extreme weakness, and save yourself alot of turmoil during the big selloffs.

Sun, 01/19/2014 - 18:33 | 4346769 Save_America1st
Save_America1st's picture

820 on the inflation calculator comes to 2300+

http://www.bls.gov/data/inflation_calculator.htm

Now account for all the leveraged gold contracts at what, like over 100:1 or something like that??? 

And what do you think gold should really be valued at today with every single currency in the entire world totally fiat with no gold backing???

And we're supposed to be crazy for stacking silver and gold????  HAHAHAHAHAHAHAHAHAHAHA

keep stackin' the phyzz, bitchez....tick-tock...shits gonna get real here soon enough!

Mon, 01/20/2014 - 01:01 | 4347489 pitz
pitz's picture

Yeah there was little to no Chinese or Indian participation in the 1979-1980 run-up.  While there most certainly will be this time around.  And remember that US treasuries were actually legitimate competition investment-wise, paying into the double digits.  Today, an investment in treasuries has almost no proposition of making any money over the next 30 years.

Thu, 01/23/2014 - 16:12 | 4360015 MeelionDollerBogus
MeelionDollerBogus's picture

and canned or freeze-dried / dehydrated food. Inflation on food is more reliable than inflation on gold & if fiat collapses so there is no paper price you still win.

Sun, 01/19/2014 - 19:17 | 4346857 pndr4495
pndr4495's picture

http://features.blogs.fortune.cnn.com/2011/05/08/who-guards-whom-at-the-... Human nature refuses to change. There were rumors on the New York trading floors about a late night emergency implementation of a rule change by the COMEX Board. Members of said Board and their trusted cohorts then began selling whatever they could overnight on the London market. Doubtless no laws were broken , since The Federal Reserve was in their first decade of magic wand money. The Hunts were unwanted interlopers.

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