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This One Chart Shows Exactly How Undervalued Gold Is Right Now...
Submitted by Tim Price via Sovereign Man blog,
For the benefit of anyone living under a rock these past weeks, Bill Gross, the so-called “Bond King” and manager of the world’s largest bond fund (PIMCO), jumped ship before he could be shoved overboard.
PIMCO’s owners, Allianz, must surely regret having allowed so much power to be centralized in the form of one single ‘star’ manager.
In a messy transfer in which nobody came out of well, Janus Capital announced that Bill Gross would be joining to run a start- up bond fund, before he had even announced his resignation from PIMCO (but then again Janus was a two-faced god).
This was deliriously tacky behavior from within a normally staid backwater of the financial markets.
Some financial media reported this as a ‘David vs Goliath’ story; in reality it is anything but.
The story can be more accurately summarized as ‘Bond fund manager leaves gigantic asset gatherer for other gigantic asset gatherer’ (Janus Capital’s $178 billion in client capital being hardly small potatoes).
This writer recalls the giddy marketing of a particularly new economy-oriented growth vehicle called the ‘Janus Twenty’ fund in the UK back in 2000.
Between March 2000 and September 2001, that particular growth vehicle lost 63% of its value. Faddish opportunism is clearly still alive and well.
We discussed this last week, highlighting this seeming anomaly that even as there has never been so much debt in the history of the world, it has also never been so expensive.
This puts the integrity of markets clearly at risk. And we have long sought alternatives that offer much lower credit and counterparty risk.
The time-honored alternative has been gold.
In fact, as the chart below shows, gold has tracked the expansion in US debt pretty handily (editor’s note: the correlation between the two is a strong +0.86).
You can see in 2011, the rise in the gold price became overextended relative to the rise in US debt. Then it decoupled and went in the opposite direction.
This is a similar trend to what occurred in the early 1980s. And if one expects that relationship to resume (we do), then gold looks anomalously cheap relative to the rising level of US debt.
A second rationale for holding gold takes into account the balance sheet expansion of central banks:
If one accepts that gold is not merely an industrial commodity but an alternative form of money, then it clearly makes sense to favor a money whose supply is growing at 1.5% per annum over monies whose supply is growing up to 20% per annum.
A third rationale for owning gold is best summed in perhaps the most damning statement to capture our modern financial tragedy.
“We all know what to do, we just don’t know how to get re-elected after we’ve done it.”
This is from Jean-Claude Juncker, former Prime Minister of Luxembourg and current President-Elect of the European Commission.
It’s clear there is a vacuum where bold political action should reside. Elected leaders continue to kick the can down the road and ignore dangers to the system.
And in this vacuum, central bankers have stepped in to fill the void via bond yields that are below the rate of inflation.
They say that to a man with a hammer, everything looks like a nail.
To a central banker facing the prospect of outright deflation, the answer to everything is the printing of ex nihilo money and the manipulation of financial asset prices.
This makes it incredibly difficult to shake off the suspicion that navigating the bond markets over the coming months will require almost supernatural powers in second-guessing both central banks and one’s peers.
For what it’s worth this is a game we won’t even bother playing.
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When THEY cash out their chips to the bagholders guess what THEY are buying....hint it aint Faceplant or Long dated T Bills
Gold, bitchez!
Guys you are all missing the point. Gold is not going up due to the fact that today through leverage you can increase the amount of gold you can buy by investing in stocks. The only problem will be to know when is the music going to stop. They will know ahead of time. We wont. So we are screwed
the right chart to superimpose would have been the s&p. Gold is just anticipating the end of QE.
Golds been used as currency for 4,000 years and you only show us the last 30?
According to the US Fed flow of funds Z1 report, total US credit market debt is $60 trillion.
Add another $100 trillion of unfunded liabilities.
No problem...provided prices don't ever fall.
Stop thinking about valuation and start thinking about utility. Gold is more than you think it is.
http://www.planbeconomics.com/2014/09/is-now-the-time-to-buy-gold/
How undervalued the gold (and silver) market is means absolutely fukin' nothing...
as long as the gold/silver market is so small...
and TPTB can (and do) so easily manipulate it with the wink-n-nod "regulators" looking the other way.
hey, tim!
a couple issues with your chart, there.
first off, i see you have gold peaking at $1800. if memory serves me right, i remember it going up to $1900.
second, your US debt (millions) chart shows we're at $18,000,000: $18,000,000 millions means the US owes $18 quadrillion in debt. you might want to check that.
<--- I love gold
<--- I hate gold
Great article explaining reasons and mechanics of gold price manipulation.
http://www.paulcraigroberts.org/2014/01/17/hows-whys-gold-price-manipula...
manipulation is a motherfucker...
Keep stacking guys....
Golds been used as currency for 4,000 years and you only show us the last 30?
Yeah....didn't want to scare you.
you might want to check that.
oops.
but the first part of the post is right, i get parital credit!
The fact that this person doesn't recognize that 18 million millions is actually 18 trillion (not quadrillion) is a great example of how hard to fathom a trillion dollars really is for the average person. It's just 1s and 0s that those who are responsible for the debt (i.e. politicians) don't give a shit about anymore.
was just a miscalculation, it could happen to the best of us. or to you.
and, politicians are those responsible for the debt? lol. smell the coffee and look in the mirror. that's who's responsible for the debt, you and your progeny. enjoy.
Stacking = 18,000,000 x 1,000,000 = 18 trillion. Your math is incorrect. You might want to check that.
Tim = To base price of gold on US debt alone is obsurd.
Stupid article, although I did like the "we don''t play this game" quote. I hold Gold and Silver for insurance only, not as an investment.
$1884.20 per Kitco chart, the above chart is off by $100. That gold council gold chart he used is odd.
Yeah, they manipulated it all t he way from $275 to 1200; you fool.
Nonsense. The real wealth in the world isn't influenced by the S&P; it is influenced by changes in the US credit / bond structure. You just don't know hat you're talking about.
Unless there simply is not enough gold available for everyone to cash out. Keep stacking. The BRICs seem to be. Maybe we'll eventually get there. If not, you'll at least have some already when they do decide to cash out.
Meanwhile JDST is up 50% over the past month. Oh ZH....when will you learn..............
Indeed, herp derp let's 'invest' in something totally manipulated and totally controlled .. thats also a fucking ROCK... which has under-performed since the 70s....
oh my of my, let us extend that performance 5 yrs fwd and then get back to me, ha...
paper to start the kindling wood for a fire for warmth in the new normal-hiding in the woods from darth.
jdst looks good,
http://www.barchart.com/chart.php?sym=JDST&style=technical&template=&p=D...
Agreed, any is better than none, and this is the move to shake out the weak holders. Just pretend you have none, forget about your insurance and PREP. Stack if you are all set in your preps, and can afford to, it's on sale and will be manipulated lower.
They're buying Bitcoin!! </sarc>
$328 today for bitcoin. I hope fonestar is ok. He may just have checked out for good. Depression, wife left, kids no longer call, he may have called it quits.
Okay, I know you want t he simple answer; the bottom is in. that's the simple answwer. It's what I said a couple of weeks ago, vis a vis silver and I looked like being wrong; but my predition was for two weeks; and I'm not wrong. The bottom is in; that's it.
And all this explains perfectly why Gold is suppressed and manipulated. Can't have something so obvious as the price of Gold declaring the Emperor has no clothes. People might just begin to wonder.
Dr Paul Krugman disagrees! His opinion is dictate per a psuedo Nobel! Your move!
People are afraid to believe anyone other than the Court Jester. That doesn't mean the Jester knows his ass from a hole in the wall, just that it is hoped he does. Time will prove otherwise.
One word answer - Cramer.
If ever there was an example of people following idiots, well, there you have it.
And as the time draws nearer, people become more impatient for it to happen.
The argument from authority is dead; defunct; it's reoognized as the last ditch effort of a looney to defend his cult. Ever since the enlightenment; we don't argue from authority; we argue from data. "In God we trust, all others bring data".
Playing catch up to the debt level, and then the over-shoot, will create some sparks, eh? As the Mogambo Guru says, this investing stuff is so easy!
Nixon understood this and made it explicit on National Television; Paul Volcker anounced, for publication that the biggest mistake we made was not to try harder to control the gold price. they all know it. They wake up at night in a cold sweat having nightmares about it. Look around you. Who was Gaddafi ? What did he do ? He started a Pan-African Union and anounced the formation of a currency for this union; a gold Dinar; he was murdered in the street by US paid thugs; and his country destroyed. the one t hing A fiat currency cannot endure is competition from a real currency; it;s like a silver dagger to a vampire; so to speak.
Honestly though, WOULD people wonder? ...
At this point im not convinced . People are a dumb animal. Just cuz they can talk..doesnt make them smart.
Its clearly manipulated. .they dont care. Gold cld goto 10000..theyd just have an excuse..and the dumbfux would believe it.
Ot:that ad that pops up on bottom of screen really fuckin annoys me.
Shhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh!!!!!!!!!!!!!!!!!!!!!
Enjoy the discount.
Nope but I'll give you reason #4) when the fed has to create a liquidity allocation with the BIS for SDR stabilization funding at the global demand from inflationary sovereign monitizing of currency. Just a small reset...reset, that was easy.
Proves the debt will come down... haha
Tyler, please bring back the math problem captcha comment requirement. Ignoramuses here are making us all more stupiderer vomiting their bile all over the site. It's gotten worse in the past year. Please bring back the math captcha.
Thanks for making us stupider.
More Common Core math please.
Suggestion to TD is to take a series 11 question or CFA 3 out of the exam guide, make it something simple like
- calculate the MCDuration of a 30s10 ladder
- NPV of a gold ETF which would be required to redeem 10MT of gold a day, and gold forwards are rolled every month.
- If I was the Chief Trader of the NY Fed, how many contracts would I have to sell each day if the market is down 5% to move the index at close.
Site would clean up really fast, Bitchez. Hell, I would donate coin just to watch Stormfront try to make a random question cheat-book to get back on the forum for agenda pushing.
Granny gold is no good. Prefer something blonde with black boots and a hat.
Silver being about 75 to 1 ratio to gold and historically 16 to 1 should do better in the future.
With the premium I get for my nuggets and being able to buy cheap coins , I am trading 1oz Gold for over 100 oz Silver. I will be stacking Silver until that changes.
Silver comes out of the earth at a ratio of 9.5 to 1.
Disclosure; uber silver bug
TPTB will do anything they can to monkey hammer tangible money like Gold.
How long can they do it?
Well, they have a digital printing press, and the police under their thumbs.
Faith and trust is what it is all about.
"Full faith and credit..." *cough*
That's why I like GOLD.
When trust fails between CBs, gold will rise.
Which really makes you wonder what kind of deal went down between the Fed and the Germans, doesn't it?
That's the $50,000 oz. Question.
I regret that I only have one green arrow vote to give you.
I used a similar chart in a 2011 speech at college. Glad to see an update. The gap is probably more pronounced if reliable statistics were known. My question is how do you know what something will be worth during an economic crash with martial law and war. Can't eat that stuff. Well some ZH'ers probably could but not most creatures.
It is really about options. Those with gold will have more options than those without.
Ditto for guns, bullets, food, water, etc.
More options.
An American, not US subject.
What we are really seeing is a chart of metal suppression success by central banks in paper markets...until it no longer can be suppressed...
We know how artificial both these prices are along with stock prices..
Gold will make a trip below 1000 before it sees any kind of real bounce... as this analysis from July has correctly predicted.
http://www.globaldeflationnews.com/gold-elliott-wave-update-for-july-2014/
is that...is that an Elliott wave chart...for gold?!?!?
check back with us around Christmas Time and let us know how your trip to $1000 is coming along. $1,000 is as impossible as Unicorns shitting skittles. THERE'S TOO MANY PEOPLE WHO HAVE GOT THE IDEA; IT'S TOO LATE FOR $1,000 gold. Wake up; oh, by the way there is no such thing as an elliot wave it is a typical construction of the explanation module in the brain; when people don't understand shit; they just start seeing things. Like Virgin Maries in the cracks in the ceiling.
And this is the paradox that so many people simply refuse to understand: gold is not really a currency, it is a hedge against inflation. It costs money to hold it. Let me repeat that. It costs money to hold it. International markets have been hoodwinked into thinking that QE and it's ilk will create inflation. It hasn't and it won't. The forces arrayed against inflation are far too strong. We are in a deflationary spiral that most market pundits and analysts refuse to consider as they believe central bankers will win. It's the same people who believe in a free lunch. Central bankers will fail ... at some point they will realize that they are pushing on a string and inflation will collapse. The opposing view to that is that central banks will err and push markets into hyper inflation. It's not going to happen. Demographics and automation of jobs will win in the end ... they always do. Gold is going much, much lower.
Its a hedge against financial collapse which may or may not include inflation.
Its also a hedge against criminal coked up bankers and the trail of complete devestation they leave in their wake.
"It costs money to hold it. Let me repeat that. It costs money to hold it."
It hasn't cost me any money to hold it. My bank will pay me like .001% interest on my deposits. So that's my "holding" cost. I feel like the money I have in the bank is much more at risk than the money that I hold onto myself. Maybe you could be right if you say that I missed out on some stawk market profits. But, if you don't sell your stawks and they fall, your paper gains are meaningless. Let me repeat that another way....you can't eat paper gains. Or losses.
sure...there is no inflation, the stock market is priced fairly based on fundamental earnings and a million dollars for a parking spot in New York City seems about right.
The market opens every day; put your money where your mouth is and help pay my bills; I don't care.
that is just poo poo talk. 3000+ dead paper currencies and a few thousand years of history says gold IS money. but hey... run with it. it's all good.
By my reckoning that chart also proves we may have 3 to 5 more years to wait before that wonderful run back to, and past "fair value" begins.
Still nice to know that in the end, the holder of the yellow metall will be vindicated. Lets hope the media and the government ignore gold holders as much then as they do now.
Ah, but they won't. corks get out of bottles, cats sneak away in the night; secrets are whispered over conference calls. They will not be ignoring it; it'll be one of the major news items every day, day, after day. THE SITUATION WILL GET OUT OF CONTROL.
Re-plot the first graph a different way. Take the difference between the price of gold and your "expected" price of gold (derived from the debt plot). Now plot that difference as a percentage of the actual price of gold.
If we're undervalued by around 33% today, you'll see that back in 2002 it was undervalued by even more. And before that it was overvalued by an even greater percentage. I don't think you can glean much from your chart.
Very good point; and you can actually study books on the nature of markets, in general, and what they do, and what they don't do; and what they do is over-shoot. to the underside, and to the overside. The major world wide secular bull market in gold and Silver changed in the Winter of 1980; and it changed again at the end of 2001; and it is in a bull market; it has not overshot; it's still recovering. the sense of time is everything. A year is nothing. A decade is something.
Definitely undervalued right now. Good time to buy using some discretionary income. As the dollar gets attacked from all angles, gold is certainly a long term safe haven.
Gold and silver are buys right now if I have ever seen it. And I have seen it.
Bought a roll of 2014 Silver Eagles on Friday . Would have bought two, but I think we still could see spot silver go to $15.00.
not for long - $2000+ soon
On this web site, it has "always been a good time to buy gold". Sounds a bit like the NAR nonsense.
"Now is the time to buy" sounds like my real estate agent too.
Doesn't matter if it is the absolute peak of the bubble or the bottom of the crash, it's the same spiel.
Buy dust
Buy dust
The nominal value of gold will decline along with those of all assets in the coming deflationary burst. Not nearly as much as most of the others however, and its purchasing power will increase as this happens.
I don't think the Fed is willing to destroy the USD with a hyperinflation, but of course if they do then gold will be a nice bridge to the fiat currency that replaces it.
Gold and silver are way undervalued.
Real Estate and tech stawks are super-duper-overvalued.
stocks up 200%, gold up 200%. imo both are overpriced due to leveraged speculation. the top in gold ~ $2000, the top in the S&P ~ 2000 points. gold is just ahead of the curve to the down side.
People don't have money. Thats why they can't buy gold and silver. You can't make the same argument two ways. Either people are poor and broke or they are not. It's obvious most are broke therefore there is no support to buy gold or silver. It's deflation.
Or they have money, but it's been so devalued that they can't buy gold and silver and need to spend it on food (where prices are increasing, not decreasing).
which will return you and I to the ever present kick the dead horse meme around here: you can't eat gold...you can't eat dollars...blah fuckin blah, blah blah...
The last day of September, the U.S. mint reported silver eagle sales of 750,000 coins. One day later, they reported another 1.65 million. Both were one day records. The two-day total – 2.35 million – was more than the entire months of August and July:
This site is full of ignorance these days
Here's another twist on your gold pump for dummies. It is possible that the 1900 buck gold you bought 3 years ago will actually become worthless.....
What if the debt drops instead of gold going up which would your divergence normalizes wthout gold appreciation.
wooooooo
scary
And exactly what will be making the debt drop? The 100M+ on means tested welfare programs? The baby boomers retiring en masse? Higher interest rates on the existing $17T of debt? Obamacare cost overruns?
There is no way in hell that US debt is dropping any time soon, unless we repudiate it. But take a look at the cowards in office.
You don't buy gold when everybody is buying and or talking about buying it ( last 3 or 4 years ). You buy gold when nobody's buying and or bashing it ( around 2000 ) . ZH writers and most of the posters can't look at a chart of gold older than 5 or 6 years. But if you look at a 100 year chart of gold you will see that it goes up and down just like anything in this planet ( real state anybody? ).
just for starters...five years ago the Federal Reserve didn't have 4.5 trillion on their balance sheet. And if the time to buy is when everyone is bashing gold than the time to buy is now. There has never been worst sentiment regarding gold and it's predicated primarily on the false idea that the dollar is strong and the recovery is real.
Just for newbies.....newbies buy on parabolic up moves ( preferentially at the very top) !! And about your " worst sentiment regarding gold " just count the thumbs down on anybody that post something against gold. Not only here but in any gold related thread. The herd is massively long, smart money getting out steadily. It is called milking the herd.
OK, OK, Listen up.
Gold will begin it's serious up trend about a year from now. I guarantee it *
* +/- 5 yrs, your mileage may vary, not available in stores, include $8.95 Postage and Handling, and tell 'em you heard it right here on Roller Derby.
That's nice and all, but the problem of price rigging must be solved first.
+1 somebody gets it
I love betting DUST.
All Fiat at $75 trillion and total Gold at $6.2 Trillion, therefore $14500 Gold at Fiat revaluation. Remember all other Fiats will die with the $.
Acutally, gold is fairly valued, because the chart is wrong. It looks at top-iine debt, and not net debt. If you subtract the value of the Fed's balance sheet, you get debt levels in the 2010-2011 range - which is where gold is now.