Charting David Rosenberg's Thesis: "No Gold Bubble Until $3,000"

Tyler Durden's picture

Today's "Breakfast with Dave" from David Rosenberg is a veritable chartapalooza, the inspiration for which appears to have been the "reversion to the mean" theme presented in yesterday's IMF chartpack, presented here. There is, however, one section that is unique: that dealing with gold, and more specifically, why in Rosenberg's opinion gold is still quite cheap and why it is trading at about 50% of what the Gluskin Sheff strategist would consider bubble value. As Rosie says: "we have liked gold for a long time and we remain very constructive. It is more than just a hedge against recurring bouts of global financial volatility. The growth rate of gold production is roughly stagnant while the growth rate of fiat currency in most parts of the world continues to accelerate. It's all about relative supply curves - the supply curve for bullion is far more inelastic than is the case for paper money. It really is that simple." Indeed it is: when one strips out all the fancy talk, mumbo jumbo, and syllogistic gibberish out of modern economic theories, be they neoclassical Keynesianism (or, god forbid, just classical), chartalism (sorry, infinite debt-money issuance won't work: in two years we will all see why), or any other attempts to reduce a broken imbalance in supply and demand propped up by the "invisible hand", it is all about supply and demand. Sure enough, one thing we have an infinite supply of is fiat money, and the resulting debt necessary to "back it up." As for demand, well that's another matter. With gold: it is just a little inverted.

So here are Rosie's charts many of which we have presented in the past, but always good to see once again.

Gold, viewed from the prism of Supply and the US monetary base:

Gold and M2: "Whether you normalize gold by the money supply or the CPI, the bull market has a long way to go. By my estimates, this does not even turn into a bubble until we get north of $300 an ounce."

More: "when gold hit its bubble climax in 1980, it got to 5x the level of the S&P 500; today gold is 20% higher. No bubble in this chart, yet anyhow."

"The story is just as valid when gold is measured in "bond index" terms (using the Ryan labs historical data for treasuries)

"Gold market cap in S&P 500 is $26 billion... only 0.2% of the entire market"

And the last observation: "gold company EPS has been blowout with earnings rising 34% in the past year and 220% in the past two years."

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Ahmeexnal's picture

Gold and M2: "Whether you normalize gold by the money supply or the CPI, the bull market has a long way to go. By my estimates, this does not even turn into a bubble until we get north of $300 an ounce."

$1600 is north of $300.

Crisismode's picture

$300./oz. in 1980 dollars maybe?

Franken_Stein's picture


Typo of Tyler's.

Append a 0 in your mind please.


Cash_is_Trash's picture

Rare earths seem to be taking note of your comment Comrade Stalin:


WilliamShatner's picture

Lovin' the rare earth stocks, I've made thousands so for on MCP, REE and AVL.

Still have some AVL, but now my exposure to MCP and REE are via the REMX etf.

Got a nice pile of Lynas and Great Western Minerals.

Long term hold on those, I'm hoping to make a small fortune on the rare earths.

Can't wait for that market to go into warp drive.

pupton's picture

How do we know how many zeros were dropped?  Perhaps $30,000 is the mark? 

Franken_Stein's picture


Have a look at the article's headline, please.


pupton's picture

I read the headline, comrade.  I think you'll find that I'm not the only one who finds the $3,000 mark not quite bubbly enough...that is all. 

Ra-Marduk's picture

Clown boy, see my comments below.

johny2's picture

Maybe he meant $300 for Silver?

drom's picture

So you must have been one of the fools selling at $300 in 2002

Quit the bull run you have missed out on then, we might be between the middle and end of this bull run now but its far from over brochacho.

We still have a large output gap and its pretty obvious that will continue into the next recession now.  I just wonder how they will find ways to print more then?  Thats really the only mystery, as we know the Bernank does not allow deflation.

HungrySeagull's picture

Gold is Heavy in Bullion form. Trading is slow right now.

When the paper money vanishes and we go back to Gold and Silver etc It's going to crush anyone who does not own it NOW!

swissaustrian's picture


Ron Paul is holding a hearing with FED´s FOMC member Hoenig (Kansas City FED chair) right now:



DoChenRollingBearing's picture

I read that article, Silver Shield!

The Bearing HIGHLY recommends that article.  Hope you get my email, Silver.  It is about, well, silver and something else for my blog.

Cheers everyone while the PMs roll!  Let's just hope that DC doesn't mess us up with their crap.

HungrySeagull's picture

PM's are like a big Salmon Run right now where I am looking at the river!

Also a Member of Silver Shield. Hope to see you there DoChen.


One trader placed 25000 coins onto the bid and it will serve as a launch pad for the rest of us at that big low price/spread.

SheepDog-One's picture

How can there be a gold bubble when our only economic policy is to print more paper 'money' out of thin air, while amount of gold stays about the same? Im calling 'no gold bubble ever'.

Smiddywesson's picture

Agreed Sheepdoggie, gold can't stop appreciating until the fiat Ponzi scheme is fixed.  The fiat Ponzi scheme won't be fixed until it goes to zero (IT'S A PONZI SCHEME).  The dollar has depreciated 98% since the creation of the Fed.  The last 2% is not the strongest 2% when we are talking currencies.  This won't take long.  

Therefore, gold has no ceiling in price.  It is impossible for it to become a bubble until the dollar melts down.  

mayhem_korner's picture

A Ponzi scheme cannot be, corrected that is.  It has no choice but to fall apart.

firefighter302's picture

Silver, too, Sheep-dog. :-)

And silver is increasing in industrial and investor demand faster than gold, imho. The direction of the government and FED are announcing to us to continue to buy metals.  Message recieved, loud and clear.


Johnny Lawrence's picture

Rosenberg has been bullish on gold for at least the past 6-7 years.  Try again.

SheepDog-One's picture

LOL, yea Rosie is somethin else. Nice avatar too funny!

kito's picture

sorry rosie the bear, but thats a ridiculous call to make.  if we wake up one day in the not too distant future and the govt announces the new widely circulated 1000 bill in place of the 100 bill, im quite sure gold at 3000 wont be in a bubble. 

Al Gorerhythm's picture

Numeraire is the measuring device that apportions value. Gold is the numeraire of paper. 1/1620 of an ounce of gold measures the current purchasing power of the paper promise of the US government's $1.00 bill or credit note. It also measures the government's ability to tax the people. The higher the number, the less revenue it gathers. That just means the nation is fucked but hey, what would gold know?

Ra-Marduk's picture

Ahmeexnal, you are an idiot. $3000 is the platform for a bubble and even that is incorrect. Try bubble $10,000. Put that figure through your pea-brain you baffoon. Thank you and have a nice day - don't forget to catch the short bus.

Smiddywesson's picture

Taleb might explain it like this.  In real terms, gold might have a maximum price.  But in the world of Extremistan, where numbers are not controlled by the physical world but are delineated by the make believe world of men, gold can rise to any price.  The dollar can be devalued to zero, so the price of gold in dollars can go to an infinite price.

All of these arguments that call a price target ignore this fact.

mayhem_korner's picture

Agreed.  The notion of a "bubble" in part is based on a "Mediocrastan expectation" of reversion to the dollar as the alpha currency.  If and when it loses enough of its value, the dollar-denominated price becomes irrelevant.

DrunkenMonkey's picture

Quite, when gold is $3000 an ounce, bread will be $50 a loaf.

Cole Younger's picture

 "By my estimates, this does not even turn into a bubble until we get north of $3000 an ounce."

Hmmmm, once we get north of $3000.00 an ounce, I suggest dollars are close to ( if not completely ) worthless. For gold to be in a bubble, the dollar would have to have some value. There has to be a number / price discovery where pricing gold in terms of dollars (or any fiat) becomes meaningless. What that number is I haven't a clue. 

Smiddywesson's picture

Hmmmm, once we get north of $3000.00 an ounce, I suggest dollars are close to ( if not completely ) worthless. For gold to be in a bubble, the dollar would have to have some value. There has to be a number / price discovery where pricing gold in terms of dollars (or any fiat) becomes meaningless. What that number is I haven't a clue. 

What number?  How about 911?  When you call 911 because your neighbors are fighting over road kill carcases, and the police don't come, gold probably has topped.

Less than two years from now.

legal eagle's picture

I remember telling someone to buy gold in 2009 and telling them it would go to above $1,500.  They said "listen, if gold goes to $1,500 I think we have allot more to worry about"   I do not know if he was right, or wrong, but I am sure he wishes he had made the purchase!

zebrasquid's picture

Been long gold since '01, and heard yadda yadda why it was just was a junk investment all the way up, and from most of the same people who utterly don't get it even now -- with all this looming crisis and QE and bailing out and spending almost half of what we spend using borrowed money.

The people that were bullish back then, and mostly all the way up, are people that actually understand the macro picture and gold (Turk, Faber, to name a couple). They are still as bullish as ever.

Who you going to listen to, them or, say, Paul Krugman(says gold is up because of flim-flammer Glenn Beck!)


It seems a no brainer to most of us, but then again, so does most common sense things.  Scary that 90% of investors seem to not get common sense.

Oh well, more for the rest of us. 

High Plains Drifter's picture

i remember reading karl douchinger's blog a few years ago,  and he always used to poo poo  the barbaric metal.......probably still does for all i know. some things never change.

sskid's picture

his unofficial fan site

Smiddywesson's picture

They can't come to grips that they were fools whose mind's were controlled for the majority of their adult lives.  That's why they can't admit, ever, that they were wrong about gold.

SheepDog-One's picture

'Money printing wont work, in 2 years we'll see why'...far sooner than that we'll see why.

High Plains Drifter's picture

would his opinion change if the percentage of americans who own gold now at 1600 did not change , even when gold is at 3000?   what is the true definition of a gold bubble when we are in a gold bull market? 

Element Investing's picture

must be bullish for tungsten

Segestan's picture

The best mind in the business of common sense is Martin Armstrong...... Great read......

Shell Game's picture

Term limits would eliminate career politicians. -from Armstrong, pg. 5


Hear, hear..

augmister's picture

.... AND stop the legal bribery of the private interests... no money from the lobbyists!  NONE!

DoChenRollingBearing's picture

FOFOA ( and Antal Fekete are both excellent too.

I like the new Up and Down voting options!  Your third Up will be mine Segestan.


I tried to up arrow you too Shell, but it won't work...

Shell Game's picture

Well, yours worked.  That's just not fair, I hope they have a blue pill for that..  ;)

DoChenRollingBearing's picture

This one worked though, thumbs up!