Is Gold A Bubble? 14 Charts, The Facts And The Data Suggest Not

Tyler Durden's picture

Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 08/03/2011 - 09:06 | 1520107 oobrien
oobrien's picture

Gold IS in a bubble in the sense that the United States government will kill it if it threatens to become a currency.

Don't underestimate Uncle Sam.

The U.S. will start taking measures when it passes 2000 dollars.

It's all a rigged fucking game.

Just my 2 cents.

Wed, 08/03/2011 - 09:10 | 1520112 SheepDog-One
SheepDog-One's picture

Problem with that is, gold isnt only in the US. When all the other big nations are saying 'Yes, gold is the new world currency and we're stockpiling it' what does Uncle Scam do about that? Launch nukes? Gold plate some more tungsten bars?

Wed, 08/03/2011 - 09:16 | 1520126 oobrien
oobrien's picture

Gold just isn't a threat to the dollar.

It's a threat to the RMB.  It's a threat to the Euro.  It's a threat to the Pound.  It's a threat to the Won.

Do you think the global powers that be are going to let average citizens own gold if it sky-rockets to 3000 dollars?

The central banks will own it.  The citizens of the wold will have it confiscated.

But maybe I'm paranoid.

Wed, 08/03/2011 - 09:21 | 1520150 SheepDog-One
SheepDog-One's picture

No gold is not a 'threat' to anything, its just the mirror of monetizers gone wild. 

BTW I dont need the lecture on 'do you assume' as Ive been the one here on ZH saying since gold was under $1,000 you will have to defend your gold against confiscation and be a felon when its banned and illegal to trade. How many are really considering that?

Wed, 08/03/2011 - 10:28 | 1520460 hardcleareye
hardcleareye's picture

There are no "safe havens" for what is to come.

Wed, 08/03/2011 - 10:42 | 1520527 The Limerick King
The Limerick King's picture



The "bubble" in gold is a ruse

Like Genocide Ben drunk on booze

He needs to stay straight

To correctly inflate

While denying such acts in the news.

Wed, 08/03/2011 - 10:52 | 1520576 Cognitive Dissonance
Cognitive Dissonance's picture

I love The Limerick King.

Maybe you need to be my editor. I pay poorly and usually not at all. Best work around though considering the 17% unemployment rate. I would rather owe you your wages than cheat you out of them. :)

Wed, 08/03/2011 - 14:17 | 1521464 akak
akak's picture

A thunderous din

Printing press roars, Ben cackles

Which is the louder?

Wed, 08/03/2011 - 12:59 | 1521089 RafterManFMJ
RafterManFMJ's picture

They've said my gold’s in a bubble

And it’ll have no use in the rubble

Tho I got in late

And bought it at 8

I’ve watched it inflate, in fact it has doubled!

Wed, 08/03/2011 - 09:22 | 1520154 mayhem_korner
mayhem_korner's picture

So he who has the most gold wins?  That argues for upward price pressure.

Wed, 08/03/2011 - 09:28 | 1520176 Cognitive Dissonance
Cognitive Dissonance's picture

Agreed. But those of us who own Gold Miners are not feeling much joy lately. Can you say divergence?

GDX vs GLD 2 years

Wed, 08/03/2011 - 09:38 | 1520202 mayhem_korner
mayhem_korner's picture

Victimized by the fact that their swimming in the same current with other equities (and not a favorite among equity bugs anyway).

Gravity will win out.

Wed, 08/03/2011 - 09:40 | 1520210 Cheesy Bastard
Cheesy Bastard's picture

There is also considerable counterparty risk.  Mines can easily be nationalized.

Wed, 08/03/2011 - 09:45 | 1520241 mayhem_korner
mayhem_korner's picture

Good point.  They're not very portable.

Wed, 08/03/2011 - 09:51 | 1520268 Cognitive Dissonance
Cognitive Dissonance's picture


But Miners traditionially have been the play to leverage Gold prices. As you can see from the chart they have not even been a 1 to 1 play. When people begin to believe in Gold, will Miners finally catch that rocket?

Wed, 08/03/2011 - 10:09 | 1520367 mayhem_korner
mayhem_korner's picture

Unless, as cheesy points out, TPTB swoop in and take over.  If not, I would expect the mining companies to fare well.  Whether the actual miners (workers) do, well, that's another story...

Wed, 08/03/2011 - 10:17 | 1520392 Cognitive Dissonance
Cognitive Dissonance's picture

While I agree there is that risk, not here, not now. Gold will need to go much higher and panic set in before the Miners are seen as the way for the CBs/PTB to attain heaven.

This 5 year chart of GDX vs GLD is very telling.

GDX vs GLD 5 yr

Wed, 08/03/2011 - 10:10 | 1520370 Pegasus Muse
Wed, 08/03/2011 - 11:15 | 1520735 Smiddywesson
Smiddywesson's picture

I think nationalization of mines is more likely than confiscation of PMs.  In the US, the environmental ploy would be my best guess, saying that these mines are big polluters and making their operations unprofitable because of baned techniques and fines. 

Wed, 08/03/2011 - 09:48 | 1520254 Cognitive Dissonance
Cognitive Dissonance's picture

I ran some charts and that doesn't seem to be the case. Miners have been clobbered since May much worse than the S&P and only in the last 3-4 weeks have they responded well. Miners, while always affected by general stock trends, usually respond well to Gold price increases. This time has been the exception compared to over the last 2 years.

Much catching up to do.

Wed, 08/03/2011 - 11:04 | 1520653 GetZeeGold
GetZeeGold's picture


The equities are tied to goes the go the miners.

You want to have physical right now.....real and in your hand.


Wed, 08/03/2011 - 09:29 | 1520178 trav7777
trav7777's picture, think about what you are saying.  Do you think the average person is going to be ABLE to own gold at $3000 an ounce?

How many ounces is the average monthly salary going to be able to run out to the coin dealer and buy?  None!  Sheeple are net SELLERS of gold.

Wed, 08/03/2011 - 09:35 | 1520195 oobrien
oobrien's picture

Brother, the more things change, the more they stay the same.

It used to be illegal to own gold in America.  That's just history.

If you do manage to buy gold, it will be illegal and on the black market.

The powers-that-be aren't going to risk their wealth so that gold vigilantes can prosper.

It's a fixed game.  

Wed, 08/03/2011 - 09:43 | 1520234 mayhem_korner
mayhem_korner's picture

History shows that TPTB have always fallen to greate forces.  There is no infinite tower.

Sat, 08/06/2011 - 07:10 | 1529988 BigJim
BigJim's picture

When FDR confiscated gold, anyone who had any money at all had gold, because gold was money.

Who owns gold now? Yes, gold bugs (what percentage of the population are they? 1%?) may have a few miserbale kilos stashed away. But most of it is held by central banks and people like Soros and the Rothschilds - ie, the politically well connected. I can't see confiscation going down well with them, can you?

Wed, 08/03/2011 - 09:35 | 1520196 mayhem_korner
mayhem_korner's picture

Sheeple are net SELLERS of gold.

I think you may have just coined the definition.

Wed, 08/03/2011 - 09:40 | 1520211 fuu
fuu's picture

When you're right you're right.

Wed, 08/03/2011 - 09:49 | 1520262 Floordawg
Floordawg's picture

EXACTLY! Plus, TPTB would have an easier time manipulating the price(s) when J6P, Chinese/Indian buyers, etc. are priced outta the PM game. Wonder what that "magic" number would be? With all the recent economic data of late, seems like the current price would suffice!

Wed, 08/03/2011 - 10:46 | 1520548 Pegasus Muse
Pegasus Muse's picture

Do you think the average person is going to be ABLE to own gold at $3000 an ounce?

That's why they mint gold in sub-ounce weights.  For example:

Wed, 08/03/2011 - 09:39 | 1520205 Floordawg
Floordawg's picture

...too much Celente will do that to you, that lil guy gets excited!

Wed, 08/03/2011 - 10:05 | 1520340 FranSix
FranSix's picture

If its such a threat to the Won, the South Korean central bank seems to have a different opinion, actually buying gold at market:

Wed, 08/03/2011 - 10:12 | 1520379 oobrien
oobrien's picture

Brother, I was in South Korea in 1997 when it was raped by the IMF.

For that time period, it was the biggest bailout in history.

Do you know what the government did?

They "asked" the people for their gold.

And the people turned it over.

Central banks owning gold is far different than average citizens owning gold.

Sat, 08/06/2011 - 07:14 | 1529991 BigJim
BigJim's picture

People wise up. Even the most obedient Asians will think thrice about sacrificing their gold for the collective, having watched it quintuple in price after they did so last time.

Voluntarily gve the overlords our gold? Hmmm... maybe not this time.

Wed, 08/03/2011 - 10:06 | 1520349 Caviar Emptor
Caviar Emptor's picture

Again, they would have to tender a price at or above melt value as they did before. 

Wed, 08/03/2011 - 11:00 | 1520624 sskid
sskid's picture

Spoken like a person who owns no gold.

Wed, 08/03/2011 - 11:25 | 1520682 Smiddywesson
Smiddywesson's picture

I agree with you that gold and silver are the enemies of all fiat, because the PMs show that paper is utterly worthless and they provide a yardstick with which to measure how much TPTB of the world are stealing from their citizens. 

You do not have to appologize for being paranoid when it comes to money.  Most conspiracy theories are not true, but most concerning money are true.  That's the nature of money, it takes too long to make it honestly, so clever little apes instead focus on forming conspiracies. 

With respect to confiscation I can't say you are wrong for thinking there will be some, especially in countries where it has been effected before, like the USA.  However, this time is different:

Almost nobody of any significance holds gold.  It accounts for only 2% of worldwide assets and most of what exists is in the vaults of the central banks.  You can bet the people who form policy also have some squirreled away.  If the public doesn't have any gold, and the people in power do, why would they make the holding of gold illegal?

The necessity to confiscate does not exist this time around.  There are no gold coins in circulation that the Treasury has to collect and melt.  That wasn't the case in the 1930s.

Confiscating all the gold and issuing useless paper like in the 1930s involved convincing everyone that all was well and cash is king, while gold was just a barbarous relic.  Fixing a destroyed fiat currency will work that logic backwards.  You collect all the worthless paper and issue something which is purported to represent real value.  That paper has to be "backed" by something for people to accept it.  Most of the people here on ZH believe it will be backed by gold, or at least partially backed in some bastardized version of a gold standard.  They were able to make a logical (if false) argument in the 1930s that they were taking unnecessary gold off your hands for real money, but the logice doesn't work if you are going on a gold standard and taking gold from the public at the same time.  After seeing paper go to zero, it is harder to snow the public. 

Confiscation would create a confrontation.  They don't want confrontations.  They want you to go to sleep and become ignorant and pliable. 

TPTB are going to get all the gold they need to make the system that keeps them in power run.  If they need more than they can aquire before we switch to a new system, they will just ramp the price of gold so it is worth enough to liquidify the system.  That means big winners and big losers, but since they are among the big winners, why should they care?  They will eventually get your gold anyway.  Eventually, you will have to sell your PMs to buy the necessities of life, and that will allow TPTB to slowly acquire the small amounts that the public holds.  

They don't need to confiscate.  Confiscation is an impediment to what they want (a smooth transition without pitchforks), and confiscation goes against their personal interests.  So, my guess is no confiscation. 

Wed, 08/03/2011 - 17:09 | 1522032 cynicalskeptic
cynicalskeptic's picture

Confiscation occurred in the 1930's for VERY different reasons.

In the 1930's there was no FDIC.  People pulled their savings from banks and - literally - put their money in mattresses or buried it inmason jars in the backyard.  Otherwise they might lose their money in a bank run.  Keep in mind the bank robberies that occurred - think Bonnie and Clyde, etc - could also mean the collapse of a small town bank.   As a result, there was a very real SHORTAGE of money.  There were not enough banknotes in circulation to conduct commerce.  

This was not a new phenomenon and occurred in the 1800's with regularity when there were nonational banknotes but only locally issued notes.  The lack of a national bank and national currency exacerbated this situation until the creation of the Federal Reserve.  (as bad as that 'solution' was it DID create a national currency).

AND with no money in banks, there was no money to lend - back in the day, banks needed SOME money in their own reserves to lend out any funds.  In fact banks were seeing massive losses on existiong loans - a destruction of capital.

BY LAW the dollar was still fractionally backed by gold in the 1930's.  You could not print more banknotes - eg create more 'money' unless you had gopld to back it.   With money being hoarded (held out of circulation) and not available to conduct commerce, there was a need for more currency.  

The confiscation of gold (and its revaluation) was a means to increase the money supply.

There are no longer ANY limits to the creation of money.  You can create TRILLIONS electronically and print to your hear's content now.  

I suspect that you COULD see some form of 'confiscation' for gold held in large funds like GLD (if it'as really there) and third party vault concerns holding gold for your IRA account and such.  These facilities hold large amounts in limited locations and are easy to access.  I suspect that much of the gold holdings in the US are in such vehicles.  You might also see nationalization of domestic minig - abrogating agreements like those CDE has wirth China who buys gold ore concentrate from them for refining.

I further suspect that any LARGE private bullion holdings are in the hands of very wealthy and powerful people - those that pull the strings of government.  THEY would not allow THEIR holdings to be confiscated.

The effort to go after small bullion holders would be prohibitive - compared to the return.  The risk would also be major as many small bullion holders seem to be anti-government libertarian types - well armed and already paranoid enough about a coming 'collapse'.   Besides, even under FDR, the government never made any effort to pursue such holdings - this was a VOLUNTARY 'turn-in' of gold. I doubt you'd see the private holding of gold made illegal - again wealthy, powerful large holders would not allow this.   You likely WILL see more vigorous controls on the sale and purchase - with a focus on collecting capital gains taxes - intersting to see of moves in Congress by more libertarian reps to eliminate capital gains on gold and silver evere make any progress (I doubt it).  

The US would be in an interesting conundrum if it tried to rein in private gold holding too much.  While the legislation enabling - mandating - the production of gold and silver coins was enacted to guarantee an outlet for US mine production back when precious metals prices were low, this legislation remains in effect and revoking it would face substantial opposition from western mining interests and libertarians.  It would also make a very public issue of gold and silver - something the US government does NOT want.  They have in fact gone to great lengths to downpay perecious metals as an 'investment' or even 'strore of value' - going so far as to actively suppress prices (see GATA's work) in an effort to 'manage perceptions.'   See 'MOPE - management of perception economics - and Rubin(?)'s paper on lower gold prices reducing interest on government debt (gold as a barometer of fiat strength).

If you look at the current status of gold in the US, you stillhave very minimal private investment holdings compared to elsewhere.  US citizens have never been through the type of economic crises seen elsewhere in the world.  Europeanshave Yugoslavia, the Ukraine and further back, Germany and Hungary as examples of currency collapses.  The rest of the world has never trusted paper money and wealth ahs been stored in alternate vehicles through history.  Vietnam which has a high inflation rate has unsuccessfully tried to better contrul gold holdings of its citizens.  Meanwhile China and India have made it easier for their citizens to both hold metals and actually use those stores of value (Indian banks now loan funds on gold).

In contrast, in the US you have investment advisonrs actively DISCOURAGING people from holding gold.  If you insist, they push you towards paper vehicles like GLD.  A case can be made that these vehicles are being used to divert demand away from physical buying and into these funds which may be holding 'borrowed' bullion.  The GLD prospectus is full of holes and legal 'get out of jail' clauses for the fund administrators.

Indeed, most ordianry people are SELLING gold now - often for far too less to walk-in shops.  They think of this as being like the 1970's where a run up in prices is temporary (not seeing a fundamental change in the status of the US dollar and the gorwing flaws in the financial system).  They are also being squeezed themselves economically and welcome the chance to turn small gold holdings - often jewelry - into cash.   They view tjhis as a 'windfall' not as a long term safe haven store of buying power.   I suspect that you are seeing gold and silver being vacuumed up from the 'sheeple' now - at what will soon be bargain basement prices.   when - not 'if' - things get worse, those selling now will not have ANY material assets of real value left to cash in.   Meanwhile, you hear anecdotal stoies of serious money buiilding up THEIR holdings of precious metals - and anything else that represents real stores of value (hence a run-up in commodities prices and the shares of copmapnies with real hard assets).

Under this scenario, you will have very little gold left in private hands - and that which remains is likely to be converted over into cash over time to meet living expenses.  


Wed, 08/03/2011 - 09:09 | 1520113 spartan117
spartan117's picture

How are they going to "kill" it?  They're going to forbid the rest of the world to own gold?

Wed, 08/03/2011 - 09:31 | 1520184 Bastiat
Bastiat's picture

There are some who think there is no "rest of the world" they believe they create history and reality. They are insane,  You can see it the Iraq and Afgan/Pak disasters and in the actions of the Treasury, Fed and Congress.

Wed, 08/03/2011 - 09:10 | 1520119 DonutBoy
DonutBoy's picture

Why does the US want the price of gold under $2000?   As Jim Rickards has said, Obama's plan is to double exports in 5 years.  That only happens if the dollar continues to depreciate.  If the price of gold is $5000 perhaps we can export Chevy Volts.

Wed, 08/03/2011 - 10:17 | 1520406 malikai
malikai's picture

In the last 3 years the dollar value is down over 50% in most commodities. Have US exports exploded since then? How much lower must the dollar go before the US exports anything besides paper and death?

Sat, 08/06/2011 - 07:28 | 1529999 BigJim
BigJim's picture

Interesting question.

This is a bit of a tautology, but the US will become an industrial exporter again when it is competitive. Which means production costs in the US will have to fall, or production costs in other countries will have to rise, or a combination of the two.

We will see this when the US is no longer spending so much on its military, and when its labour laws are relaxed, or the dollar drops so much that minimum wage is irrelevant.

Wed, 08/03/2011 - 17:14 | 1522043 cynicalskeptic
cynicalskeptic's picture

What's left ot export?  Our industrial base - the means of production - has already been 'exported'.  

Agricultural products - food - remains a big export BUT with every ton of grin we're exporting the oil we IMPORTED that fueled the tractors and combines, made the fertilizer needed to grow it.  Hectcres of water pumped from aquifers (not beintg replenished) also gest exported.  If you price food in terms of REAL and TOTAL costs, we are foolish for 'giving it away' at any cost when the arable acreage in the world is declinging.  China is buying u arable land in Africa and elsewhere at a breakneck pace

Sat, 08/06/2011 - 07:30 | 1530000 BigJim
BigJim's picture

It's true that our industrial base has been exported. But this statement makes it sound like some kind of final, irreversable act.

If the US becomes a competitive environment in which to run industrial businesses, they will be just as quickly imported back.

Wed, 08/03/2011 - 09:11 | 1520123 Pladizow
Pladizow's picture

Gold id the second coming  - here to save the financial/economic world - pay homage and repent now!

Wed, 08/03/2011 - 09:15 | 1520130 mayhem_korner
mayhem_korner's picture

Not so sure about that.  Lotsa foreign CBs loading up on gold, which will make it tough for U.S. to coerce a sell-off without creating "act of war" sentiments.

Also, practically speaking, where would the bux flow to from a coerced selloff?  Crashing Au would boost the dollar, making it even tougher to melt away the debt, which is the grand plan.

I would argue that confiscation is a more likely route than killing gold.  Wouldn't want to have to expose all that tungsten sitting in Ft Knox...

Wed, 08/03/2011 - 09:41 | 1520221 trav7777
trav7777's picture

by that point, who is going to obey?

Wed, 08/03/2011 - 10:11 | 1520372 mayhem_korner
mayhem_korner's picture

I dunno.  I know I won't.

Wed, 08/03/2011 - 10:21 | 1520429 malikai
malikai's picture

Exactly, and many of us have already taken steps to make sure most of our gold and silver is well out of the knowledge and reach of bankers and governments. In my case, the US government knows I've bought gold, but I'm outside the US, so good luck with that Uncle Sam. Also, the country where I live knows about some of my purchases, but again, my metals are unlocatable even in this country, not to mention the stash I've put away in a third country.

Wed, 08/03/2011 - 11:48 | 1520855 Smiddywesson
Smiddywesson's picture

Also, practically speaking, where would the bux flow to from a coerced selloff?

Agreed.  Once they have all the gold they can acquire, it will be in their best interests for the price to go up, not down.  They can thereby make the banks solvent and soak up all that extra liquidity they printed and lock it safely away in their gold vaults by making the price of gold go up, not down.

They have had four years to replace the gold in Ft. Knox.  It would be incredibly stupid of them not to have begun replacing that tungsten when it was clear the end was approaching.  A general acknowledgement of that theft would threaten TPTB's continued existence and they intend to survive the coming events.  (They can always steal it again when the dust clears). 

Do NOT follow this link or you will be banned from the site!