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Is Gold A Bubble? 14 Charts, The Facts And The Data Suggest Not
From GoldCore
Is Gold a Bubble? 14 Charts, the Facts and the Data Suggest Not
Introduction
For more than 3 years - since gold rose above its nominal high of $850/oz in February 2008 - there has been much talk about gold being a bubble.
Nouriel Roubini, professor of economics at New York University's Stern School of Business, is one of the more prominent financial and economic experts who said gold was a bubble and many other experts internationally echoed his sentiments.
On December 10th, 2009, with gold at $1,100 per ounce, Roubini, said, "all the gold bugs who say gold is going to go to $1,500, $2,000, they're just speaking nonsense". Roubini went on to say ,"I don't believe in gold."
Gold has now risen 50% since then and Roubini has been silent on the gold price.
We believe that he was wrong regarding gold as he, like many in the western world, is simply not aware of the facts and the fundamentals driving the gold market. He also is not aware of gold’s diversification benefits.
The fundamental drivers of the gold market are not appreciated by most and rapidly get forgotten by many due to the daily barrage of noise and fear emanating from the markets.
The facts and charts below strongly suggest gold is not a bubble.
However, even if it were a bubble, those calling gold a bubble should acknowledge the diversification benefits of owning gold and urge diversification rather than vainly trying to predict the future and the future movement of asset prices.
Gold Drivers
The precious metals of gold and silver are driven by a wide variety of factors, including money supply, debt levels, currencies, CDS spreads, interest rates, inflation and fabrication demand from downstream sectors such as jewelry, electronics, and solar applications.
Investment demand has been one of the primary drivers more recently as investors have used precious metals as a store of value in the face of dollar and currency depreciation as well as a general hedge against inflation.
Investment demand includes significant and growing demand from store of wealth buyers in Asia, investment and diversification demand from hedge funds, pension funds and central banks and monetary demand from central banks.
This demand is due to concerns about the global economy, growing inflation risks and the real risks posed by currency debasement being seen globally.
Gold remains the preserve of the smart money, many of whom predicted the current financial and economic travails.
Risk aversion and concerns about wealth preservation due to currency depreciation remain the primary demand drivers.
Demand is due to ‘risk aversion’ hedging and diversification and can be broadly characterized as ‘prudent diversification’ rather than the ‘fear trade’ that some have called it.
There is no irrational exuberance or broad based belief amongst journalists, analysts, experts and the public in general that gold is a one way ticket to being rich. Indeed, there continues to be very little coverage of gold in local media and only the occasional coverage in the non specialist financial press. This is especially the case in the UK and Ireland and in the European Union.
There is no “greed trade” or buying of gold by the general public in the belief that making a return or a profit is guaranteed.
This was seen in the Nasdaq bubble and more recently in the property bubble that afflicted western countries.
Thus, retail demand, contrary to some hype and silly talk of people “piling in”, remains negligible but is gradually increasing from a very small base.
Increasing global demand (especially from Indian and Chinese savers, investors and their central banks) is being confronted with anemic supply as mining supply is marginally lower than the record levels seen in 2001 (see chart below).
This year scrap supply (due to the global ‘cash for gold’ craze) will be much lower than last. Hard pressed consumers internationally, and especially in the western world, have already misguidedly parted with the ‘family gold’.
All of the gold in the world that has ever been mined, if refined (0.9999 pure), would fit into a 21 metre high cube and is very rare. Thus, if even a fraction of flows in global capital and currency markets flows into gold, prices could rise very sharply and go parabolic.
Another factor, not known by most, is the massive concentrated short positions held by a few Wall Street banks.
The Gold Anti-Trust Action Committee (GATA) has gradually amassed evidence of market manipulation and a covert attempt to keep gold and silver prices low. Its London conference is this week and will hear from very astute analysts that there is now the real risk of a massive short squeeze that will lead to a gold cartel losing control of prices and a parabolic surge in the gold price and significant dislocations in financial markets.
GoldCore does not endorse GATA but has always found its work thorough and thought provoking. Indeed, its key contention has never been refuted or rebutted by the banks in question or in the media.
Should gold go parabolic, it may be time to reduce allocations to gold – but we appear to be a long way from there yet.
This is not the end game which unfortunately looks increasingly like an international monetary crisis – centered on either the U.S. dollar or the euro or both.
Having looked at the reality of supply and demand in the gold market let us now look at some important charts courtesy of Bloomberg Industries.
Gold Charts
These 14 charts from Bloomberg Industries strongly suggest that gold remains far from a bubble.
Declining U.S. Dollar Continues to Drive Precious Metals Higher
A declining U.S. dollar has been one of the primary drivers for precious metals. If the historic negative correlation between the dollar and precious metals continues to persist, further dollar declines will ultimately be positive for precious metals.
Gold Outperforms Currencies as Demand for Hard Assets Rises
Dow-to-Gold Ratio: Financial Assets vs. Hard Assets
The ratio of the Dow Jones Industrial Average to gold displays the cyclical nature of the battle between paper and hard assets.
Paper assets (i.e., financial assets) have excelled when economic growth has been strong. When growth has faltered or the outlook was less certain, hard assets have outperformed.
Gold and TIPS Moving in Tandem Amid Record Low Interest Rates
Record low interest rates have moved gold and TIPS higher in 2011. While the correlation between gold and TIPS declined earlier in the year, the recent rise suggests investors are more willing to pay more for inflation protection. New highs in the gold price may be signaling increased TIPS prices and inflation expectations.
World Gold Production – 2000 - 2011
China Consumers Increase Jewelry Purchases at Quickest Pace
China has been the largest buyer of gold jewelry since 2008; its demand has grown rapidly during the past decade, and it has surpassed India, which had been the largest buyer for decades.
Chinese consumers are fearful of rising inflation, and have diversified into gold.
China and India Jewelry Demand Rises
Demand for jewelry has increased steadily as individuals buy gold and other precious metals as a hedge against inflation.
China, in particular, has had a large increase in jewelry demand, spurred by a change in government rules allowing easier access to precious metals.
U.S. M2 Growth Expands in June, Correlates High With Gold
The U.S. M2 money supply accelerated in June to a 6.0% yoy pace, the highest reading in 22 months. The U.S. consumer price index (urban consumers) remained at a 3.6% yoy pace in June, in line with May's results. The correlation between the total U.S. M2 and gold has exceeded 0.90 since November 2004.
China M2 Money Supply: M2 Growth is Decelerating, Yet Still Rising
Gold Moves Higher with Chinese Inflation
China’s M2 money supply has been rising by 20%, Switzerland’s by 25%, Russia’s by 30%, and the world’s by 8%-9%. Japan’s M2 is expected to move higher after recent events. In order to fight economic and debt issues, paper currency has been printed at historically high levels.
Rising Debt Levels Drive Gold and Silver Higher
Precious Metals Outperform Other Asset Classes
Institutional investors have avoided precious metals during the last decade. Comparable performance from other assets such as stocks and bonds has been poor and as this gap widens and the need to diversify intensifies, institutional ownership in precious metals could increase driving prices higher.
Conclusion
As a percentage of assets, gold ownership remains negligible vis-à-vis assets such as equities and bonds. Ownership of gold is likely to be less than 2% of global investable assets. This is in marked contrast to the end of gold’s last bull market when gold and gold stocks accounted for over 20% of global assets.
Gold remains badly analysed, under-owned and under-appreciated. This will change in the coming months and years when the importance of gold as an investment and currency diversification and as a store of wealth is appreciated again.
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Sorry Gram's, but gold is $10,000 an oz I'll bee needin those trinkets I'll bury ya back proper.
a friend of mine i knew worked at a funeral home. he told me the kinds of people who bury money and gold etc with the bodies...........ha ha ha , one of them were gypsies..........
Make sure to throw in a few good shovels into your preps. haha
I think you've nailed it. We need to be on the lookout for a surge in grave robbings. That will be the clue to the bubble formation.
An exponential price rise--check. Won't go on forever, doesn't matter what you think you know about currencies
No it dosn't matter what you THINK about currencies it matters how much they print. Gold is the ultimate money and it's parabolic rise is a reflection of the compounding of interest in fiat money. It will crater when money creation craters--never.
Peak Gold
Numerical Analysis of Historic Gold Production Cycles and Implications for Future Sub-Cycles
J. Müller and H.E. Frimmel Pp 29-34
Gold production at an industrial scale developed with the discovery of gold in Australia and the USA in the middle of the 19th century. Since then the gold production rose exponentially with a rate of approximately 2.0% thus reflecting a first-order production cycle. Within this rise, however, four individual sub-cycles can be identified. The current sub-cycle is predicted to lead from a peak in 2001 of 2,600 tons to a global production of 1,600 tons in the year 2018 or even as little as 780 tons in 2026. Further analysis of these sub-cycles, consideration of declining ore grades and energetic constraints lead us to suggest that the year 2001 indeed could have been the peak-gold year of the main 'Hubbert-style' production cycle. A cumulative achievable gold production between 230,000 and 280,000 tons is derived from the application of the so-called Hubbert Linearization. This compares well with a minimum of about 285,000 tons of combined past production and known reserves and resources.
Report..
http://benthamscience.com/open/togeoj/articles/V004/29TOGEOJ.pdf
..
Guys, can someone explain to a n00b what happened to gold when it fell of the cliff in the 80s?
central banks put the kabosh on it then as they do now. except then they had more opportunity. now they are running out of rope.......fundamentals will eventually catch up with supply and demand issues.......
Ok thanks. I was thinking maybe fiat purchasing power actually increased then, but I guess not.
collapse of the dollar was staved off by an unholy alliance with the House of Saud. In addition, the gold production base moved from a few major producers to a fragmented supply regime. And CBs dumped
Paper tricks like gold leasing and naked shorting allowed central bankers to manipulate gold prices.
Slow corruption of regulation and of markets
Also, the creation of paper markets outside the commodity markets, such as stock options and other types of derivatives, diluted the speculative forces in the PM markets, leaving central bankers with an easier job in holding down prices.
two and a half drivers..
Interest rates jacked to create positive real rates and strengthen dollar. This destroyed US productivity long term... Triffin Dilemma be damned
From 1980 - 2000 Gold mines, primarily African pulled out everything they could flooding the market..
(half) Derivatives took off in 1981
These things can't be done today..
Gold ... WINNING
..
The reason gold rose sharply from its level of 2001 is that for two decades previously it had been under the pressure of three singular forces that brought new supply onto the market: central banks' herd-minded selling of gold, the discovery of the heap-leaching gold-extraction technique from piles of ore leftover from old mines, and the opening-up of formerly out-of-the-market regions with easy-to-mine deposits in Russia, Africa, Indonesia, etc.
It is therefore reasonable to smooth out both the dip in the 80s and 90s and the rip in the noughties to uncover the true trend of gold's price over the past 30 or so years, which yields a much gentler long-term upslope. Gold has just been making up for lost time in the past decade, not “going on a tear.”
Thanks again, guys. I really appreciate the insight.
In addition to the other responses... During the 80s China and India were not big players in the PM game. Now they are the BIGGEST players in physical PMs.
gold is not in a bubble. like any commodity, occurrences can cause it to go up or down.
the bubble is inside roubini's head (and those that just won't accept).
sheep - don't dismiss what oobrien is saying out of hand. it is in the realm of possibility.
Ive been hearing all the dire warnings about how gold is overvalued and certain to fall off the cliff since I was buying it at $400. *yawn*
for exampe.............robert prechter , gekko's favorite prognosticator.........
speaking of gordon gekko, where is that bad man these days?
i think i spotted him working at the golden arches the other day.
he's coming around...
i wish steve lies man would post around here again. i would move to have a verbal altercation with that communist jackass.........
Disclosure: YES I do own metal and I do believe in its wealth maintaining properties...
However, to be honest, I personally don't know how anyone can say Fiat is a bubble and not realise that the price of Gold is built upon the main principle that normally applies to currency; specifically, it's only worth what someone else is willing to pay you for it. In that sense of course it's a (constantly potential) bubble. How can anyone REALLY think that an ounce of Gold is REALLY worth north of $1660 currently, when something like clean, fresh drinking water, that is absolutely essential to sustain human life, is valued so cheaply in the world. Stand in a desert region that hasn't seen a drop of rain for X years and then tell me otherwise.
In essence, Gold is a confidence trick, started and maintained by the wealthy.
horseshit. Gold has value because bitchez give up pussies for it.
Water is cheap because it is in relatively abundant supply
on come on now trav. you know as well as i do, that all females think they are sitting on gold mines?
"How can anyone REALLY think that an ounce of Gold is REALLY worth north of $1660 currently, when something like clean, fresh drinking water, that is absolutely essential to sustain human life, is valued so cheaply in the world"
Because, when a currency falters or collapses, as in Argentina, Weimar, Zimbabwe, or Yugoslavia, gold will buy those essentials when paper won't.
It's a strawman to say that one must choose between essentials and gold. That defeats only the caricature of the case for gold that says that 100% of ones assets should be in gold. The reasonable gold bug advocates 25%. The article mentioned that the wealthy and prudent are increasing their (tiny) allocations of gold in their portfolios. You can't defeat their rationale by saying that essentials are more vital than gold. That's just a variation on the "you can't eat gold" strawman.
Yes and no to your post. Value is determined by what someone will pay for something. Supply and Demand can affect that value (ie scarciety) Water is more valuable in a desert, less so next to a clear running mountain stream. Women are valuable where there are fewer of them (see China, India). Supply. Demand. Gold has a finite supply, has to be mined or discovered, is not created at the push of a button (like Fiat).
When/If SHTF, people will determine what is value. Food, Water, Shelter, Clothing. Gold/Silver is the means to purchase it if you haven't stocked up on it. Lead isn't a bad choice either.
Based on Jeremy Grantham's definition (two standard deviations from the trend line), gold is in a bubble.
Whats Granthams say about trendlines of printing trillions in new debt every year as your ONLY economic model?
I love the way Nouriel Roubini sats bobble
his flip flopping and status quo ways, have been a total and bitter disappointment..............
He is an economist, of course he is a disappointment.
Maybe when we talk bubbles a good definition of what a bubble is and how to recignize it would be of help.
The late Hyman Minsky knew that there was nothing new under the sun. If her were alive today, he would have understood exactly the dilemmas raised by today’s explosive growth in real estate prices.Minsky developed a simple universal framework for understanding all bubbles. The circumstances of each bubble may differ, but each one goes through seven stages.
Stage One – Displacement
Every financial crisis starts with a disturbance. It might be the invention of a new technology, such as the internet. It could be a shift in economic policy. For example, interest rates might be reduced unexpectedly. Whatever it is, the world changes for one sector of the economy. People see the sector differently.
Stage Two – Prices start to increase
Following the displacement, prices in the displaced sector start to rise. Initially, the price increase is barely noticed. Usually, these higher prices reflect some underlying improvement in fundamentals. As the price increases gain momentum, people start to notice.
Stage three – Easy Credit
Increasing prices are not enough for a bubble. Every financial crisis needs rocket fuel and there is only one thing that this rocket burns - cheap credit. Without it, there can be no speculation. Without it, the consequences of the displacement peter out and the sector returns to normal.When a bubble starts, the market is invaded by outsiders. Without cheap credit, the outsiders can’t join in.
Cheap credit is the entrance ticket for outsiders. For example, gas prices have risen sharply in recent years. However, banks aren’t giving out loans so that people can store gas in their garages in the hope that the price will double in three months. The banks, however, are prepared to give loans to people with poor credit to hold condos in the hope that they can be quickly flipped.
The rise in easy credit is also often associated with financial innovation. Often, a new type of financial instrument is developed that miss-prices risk. Indeed, easy credit and financial innovation is a dangerous cocktail. The South-Sea Bubble started life as new-fangled legal innovation called the limited liability joint stock company. In 1929, stock prices were propelled into the stratosphere with the help of margin calls. Housing prices today accelerated as interest-only mortgages emerged as a viable means for financing overpriced real estate purchases.
Stage Four – Over-trading
As the effects of easy credit kicks in, the market starts to overtrade. Overtrading stimulates volumes and shortages emerge. Prices start to accelerate, and easy profits are made. More outsiders are attracted, and prices run out of control. Accelerating prices attract the foolish, greedy and the desperate to enter the market. As a fire needs more fuel, a bubble needs more outsiders.
Stage five – Euphoria
The bubble now enters its most tragic stage. Some wise voices will stand up and say that the bubble can no longer continue. They put together convincing arguments based upon long run fundamentals and sound economic logic. However, these arguments evaporate in the heat of the one over-riding fact – the price is still rising. The wise are shouted down by charlatans, who justify insane prices by the euphoric claim that the world is different and this new world means higher prices.
Of course, the “new world” claim is true; the world is different every day, but that doesn’t mean that prices run out of control. The charlatan wins the day and unjustified optimism takes over. At this point, the charlatans bolster their optimism with the cruelest of all lies; when prices finally reach their new long run level, there will be a “soft landing”. The idea of a gentle deceleration of prices calms the nerves.The outsiders are trapped in knowing denial. They know that prices can’t keep rising forever, but they rarely act on that knowledge. Everything is safe so long as they quit one day before the bubble bursts.Those that did not enter the market are stuck in a terrible dilemma. They can not enter but neither can they stay out. They know that they have missed the beginning of the bubble. They are bombarded daily with stories of easy riches and friends making massive profits. The strong stay out and reconcile themselves to the missed opportunity. The weak enter the fire and are damned.
Stage Six - Insider profit taking
Everyone wants to believe in a new brighter future but a bubble takes that desire and turns it upside down. A bubble demands that everyone believes in a brighter future, and so long as this euphoria continues, the bubble is sustained.However, as madness takes hold of the outsiders, the insiders remember the old world. They lose their faith and start to panic. They understand their market, and they know that it has all gone too far. Insiders start to cash out. Typically, the insiders try to sneak away unnoticed, and sometimes they get away with it. Other times, the outsiders see them as they leave. Whether the outsiders see them leave or not, insider profit taking signals the beginning of the end.
Stage seven - Revulsion
Sometimes, panic of the insiders infects the outsiders. Other times, it is the end of cheap credit or some unanticipated piece of news. But whatever may be, euphoria is replaced with revulsion. The building is on fire and everyone starts to run for the door. Outsiders start to sell, but there are no buyers. Panic sets in; prices start to tumble downwards, credit dries up, and losses start to accumulate.
Here is the paradox of all bubbles – everyone knows how the fatal combination of easy credit, overtrading and euphoria will affect prices. Minsky didn’t need to write down a thing about the madness of speculation. America’s investors have a lifetime of experience. Within the space of five years, America moved from the tech stock bubble into the real estate bubble.Today’s housing prices are grossly overvalued. Everyone knows that prices will collapse. It might be tomorrow, or it might be two years from now. One thing, however is certain, the longer it takes for the bubble to burst, the more painful it will be.
all Confidence Schemes are like this. What other confidence schemes can you point out? the FRN and USTs are both the same thing.
I can see how that applies to tulips or real estate which can be produced en masse when the heat is on.
Fails to address the distinct nature and character of gold though.
By the way.. how much gold does the Vatican have?
i don't trust men who have the first name "hyman" ...........:)
A "bubble" implies that when it pops, the debris will fly everywhere.
Hopefully gold is in a huge bubble and when it pops, I'm gonna catch me some more.
This discussion is stupid. The focus and the attention on gold are real. When the herd mentality kicks in and everyone that can afford to buy some, goes to buy some it will drive the price much much higher. Gold owners are KLINGONS. They typically don't sell unless they have no other options and they're out of ammo. But their desperation is someone else's fortune. That won't kill the price because gold cannot be replicated like stock certs, fiat money or houses.
Name me one other asset class that exhibits the same structural benefits.
remember the verbal exchange between chair satan and ron paul at the last meeting before congress....
is gold money? ahhhhhhhhhhhhhh no..........
then why do central banks want it.............ahhhhhhhhhhhhhh , its a asset............
Gold is reflecting a dollar bubble and not the other way around. $1670!
The fundamental problem is one of belief. Mister Roubini reveals his deceptive
worldview when he says 'I don't believe in Gold'
Gold requires not your belief, it being substantive and material with or without you.
Roubini is assuming your theater like suspension of disbelief, a working proposition
in a gun fight for those that don't believe in bullets. *cough*
Gold cannot account for %20 of global assets without being priced
somewhere well over 100k due to unbridled fiat currency creation.
That having been said, the true price of gold must 'discover' higher
over time much as water must find it's level. When a financial adviser
to the English Throne posits gold at over 10,000 USD/oz , you can read
it as Gospel. Belief coming full circle, so to speak. Roubini and Celente
both showed up at the same time, transparent talking heads to misguide
serving disparate yet large segments of Iconsumers, information consumers,
foisted upon us by the mainstream corporate mouthpiece apparatus.
Roubini is a Main Stream Media darling but otherwise clueless.
Celente talk revolution, dire outcomes and hell is coming to breakfast... reminds me of an evangelical preacher that has drifted off topic... a rabble rouser if ever I listened to one. In addition he has a chip on his shoulder about being Italian and having Italians cast in a bad light in gangster movies. Draw your own conclusions...
Plus, he is an irredeemable New Yorker (city of), most of whom are of course arrogant pricks and loudmouthed, opinionated assholes (case in point), and who are inevitably scarred by the discovery that they and their congested urban hellhole are not, in fact, the center of the universe.
Gold is....
Flying High Againhttp://www.youtube.com/watch?v=23XQeLGNAeA&playnext=1&list=PLF1715596D47...
For the reasons mentioned in the article, gold is not a bubble. Let's look at a couple of numbers:
- US current account deficit 2011 - $550 billion or so.
- US budget deficit 2011 - $1.6 trillion.
- Annual gold production 2011 in $'s at current market ~ $135 billion= 1 month of US government deficit!!! Who's the bubble here? And mind it that the annual supply of gold has to be mined and that costs a lot of money - the above number is just the value of the output before any costs.
- QE2 just printed ~ 4.5 years of gold supply ... or rather the dollar equiavalent.
The markets are uncertain but I am a veteran and a successful one too. This is my opinion. GOLD is the best macro trade out there (and SILVER as well). Fundamentals have never ever been so good for prices to go up and they will. Shorter term the market is always very hard to call but by year end I expect 1750 gold to print. Longer term, by 2015 we should see a $3000-$5000 range and I don't think this is aggressive.
Finally, I would like to address the topic of market manipulation. My take on this is that if the market is manipulated, this is good as it provides a lower price to buy. Yes, volatility is there but we have so much physical buying + trading in Europe and Asia that I doubt that the precious metals can be held back by a few players trying to push the market. Don't know how much manipulation we have on a medium/long term basis (short term we have it for sure) but my point is that these guys will have to buy eventually and it means you should buy before they cover their foolish shorts.
We have debased the dollar by 98% in the last 98 years. Things are much worse now than ever before. I have no trust that last 2% will survive the next two years. I called bullshit on the call that we would have $1700 by the end of the year and said we would see it much sooner. I just didn't expect to be knocking on that door in the very same week.
The price of gold just took a much steeper angle since July. This thing is accelerating. We are going to hit your targets by Christmas 2011. We will be lucky if the dollar makes it into 2013. Parabolic prices in gold and silver are closer than you think.
I do believe in gold, principally because I cannot identify any other asset that acts as a safe haven to preserve wealth in the face of the moneyprinting onslaught to which we are being subjected.
But I am worried that we are currently being subjected to the same 'pump and dump' operation by the mega crooked Wall St banks that silver suffered in late April. These people hold all the strings, control all the flows, have advance knowledge of productions, deliveries, contracts from dealers and producers... and can raise and lower margin requirements on COMEX at will.
Hats off to General Jim.
Finally, gold acheives its oft-discussed target of $1,650.
My "Formula" is officially dead.
Gold is now firmly in the "safe haven" catagory with SNB and bonds, disconnected from the S & P 500.
hey look. its robo. he has joined the gold discussion........isn't that sweet? :)
reluctantly, the 'tard offers a non-apology quasi mea culpa for smearing gentleman jim sinclair, whose jock strap he could not carry. pathetic, ungracious, and certainly not a man who can admit fault, or being wrong easily as most successful men willingly do.
Yeah, it sure doesn't make up for his outright slander of a good and decent man. Thanks for pinning him down Lt. John.
frankly, i've wasted too much precious time in life exposing the miscreant poster known as robottrader.
"My "Formula" is officially dead."
Does this mean you are done with the current schtick?
the nerve of this guy trying to pass that bullshit off on us.............
And markets are way down, which you said could never happen with gold going up. Well back to the Etch'a'Sketch Robo
Uh-oh. I think it's time to start loading up on puts now that Robo's in the gold train.
Robobug,
Welcome aboard, the ship is about to sail
Dump dem bonds overboard and let's roll!
one thing to consider. it's possible that tptb might just let gold and silver rip. it could be that tptb have decided the game is lost, there's no salvaging a dying system and thus grab the gold and silver, hunker down and let happen what happens. just a thought. i'm positioned accordingly.
it appears they are letting the air out of the bag slowly, ala the frog and the boiling water example etc............
sure looks like it. after about another 50% to 60% runup maybe the public will notice.
I know this is not an investment blog and that I'm late to the party, so I apologize for this question, but other than actually having physical gold, what is the best way to invest in the commodity in the financial markets? GLD? Futures contracts (QO)? If futures, do you usually buy the next expiration and then roll?
Gold coin in your hand.
Anything else is somebody's promise to pay.
Either you have gold in your hand or paper in your hand... If you want paper why not stay with FRNs?
If you want gold, get gold.
I would have absolutely no idea how to invest in floating rate notes (TIPS?), and I don't have the capital to buy those. I know the idea of the monetary system crumbling is the idea behind owning gold, i.e. investing in gold in the financial markets just returns dollars that will eventually be worthless, but I'm concerned now, for the time being, with storing gold. I'd rather realize a huge profit, cash out quickly and buy gold down the street in six months to two years time.
That's why I was wondering about the best way to play it in the markets.
Think about what you're saying for a second.
By the time you "realize a huge profit" it will mean that the price of gold will have increased and become even more expensive for you to "go down the street" to buy. If you just purchased it in the first place, you would have saved yourself a step.
I don't understand what this fascination is with the problem of "storing gold". You can quite easily hide 100K of gold in your 2 front pockets. I think people have this fantasy of owning a big safe full of gold bricks. For christ's sake it's almost $1700 for one single 1oz coin.
It's like someone saying, "I'm afraid to have a wallet. Where would I store it?"
Thank you, Rusty, for making that valuable and very salient point!
I personally believe that these mainstream bugaboos over the "difficulty" and "risk" of storing gold are just talking points #142 and #143 in the official Anti-Gold Disinformation Manual, the Malleus Maleficarum Aureum, as it were.
natch
Not even a serious pullback over the last 5 trading days.
What does an investor do that's been in cash for a while? After his/her government decides to screw the pooch even more and dilute the money further?
That IS the stampede many here have been warning about. Once the herd says "fuck it" to equities, bonds and everything a decent HP product can replace.. watch for the sky!
The only thing that could potentially pop the gold bubble is if there was something completely new and innovative coming to the market, like for example an elixir that turns ugly into pretty, old into young and extends life expectancy by 50% guaranteed.
Let me know when that product is showing up anywhere.
It's a bubble: now sell me some.
Unlike 1933, the dollar is not on the gold standard. Back then that was the justification for the gold "seizure" (where the government actually paid ABOVE market value for the gold). They wanted to fight the "liquidity trap" of actual money being put under the mattress. Today things are drastically different: the dollar is not tied to gold. There is no liquidity problem with a printing press and helicopter delivery system. Money is digital. The government would never want to pay hundreds of billions for what they consider antiques. The whole philosophy of economics is disconnected from notions that gold can trap liquidity. In fact buying gold puts more dollars into circulation from out of the coffers of the wealthy.
You keep repeating that when Rosenfeld stole the gold it wasn't theft. I would like to ask you again: when someone points a gun (actually 1 million guns) at you, threatens you with lead and kidnapping, and takes what you had no intention of surrendering, is this theft?
Is it a different act if he hands you some freshly-printed confetti of no value?
In the mind of a collectivist I guess this is called voluntary exchange.
He also failed to note that the value of gold had been officially set, so that when they took everyone's gold by force, which is exactly what they did when they made it illegal to hold it, they were still exchanging their paper for your property at less than its real value.
Gold is most certainly in a bubble by any criteria you can come up with. After all fundamentally gold is just one of many available ornaments, and by far not the rarest.
And it's been in a bubble now for, umm, at least 10,000 years.
It's got to end someday. It's just got to.
And the really confounding thing is, bubbles somehow independently emerged in pre-Columbian America without any apparent influence from Eurasia. This sure is one bubble-prone metal, folks, watch out.
Some of you guys couldn't detect sarcasm to save your lives.
The only buyer for GOLD is GLD (ETF)..It is manipulated.
Bubble or not. There's simply no other way for a free man to protect himself from the theft of his purchasing power by the state.
Tyler you may want to ask Kiril Sokoloff what his position on gold is today. Since he did sell off all of his bonds and move into gold when it was dirt cheap many moons ago.
In fact, an interview with Sokoloff would be most excellent companion piece!
Some things never change...................
GOLD will be in a bubble, when everyone and their dog is trying to own it.
At .08%,maybe 1.0%, of the US population actually HOLDING it, I do not think that even comes close to Bubble territory.
The Bubble is caused by devaluation of currency, and loss of confidence.
And there is NOTHING the .gub can do about this.The die has been cast.
They can EO it to $500.00 an ounce, the rest of the globe, will say screw you, and people will imply move it out of the states......
bubble or not, just look at silver..
No bubble there. Historical 16/1 GSR puts it at over $100. 20/1 GSR at $80. 10 GSR, as Sprott predicts puts it at $170. That is at today's gold prices!
the historic GSR values will be shattered when silver crosses $55 and goes parabolic.
Shifting from a paper-rigged pricing regime to real physical supply/demand driven price discovery.
It will be disorderly and it will wildly overshoot when the manufacturers panic and start grabbing whatever they can get.
Everyone should pay attention to what Bastiat wrote.
In Weimar Germany, Austria, and Hungary in the 1920's, the farmers refused to sell their crops because the currency situation became so accute. There was starvation, but why sell when that bushel of wheat would triple overnight?
So when gold and silver go parabolic, the manufacturers and vendors of PMs are going to close shop along with the rest of the vendors in real assets, like food, but the PM sellers will understand what is happening and react first.
That is the canary in the coal mine. When the gold sellers freeze up, buy as much food as possible.
Gold has been tracking the debt ceiling for 15 years: http://www.zerohedge.com/article/gold-rise-143-trillion-us-debt-limit-increase-%E2%80%93-bloomberg-chart-day
When the ceiling was just raised 20% from 14.3T to 17.1T, gold's target within 18-24 months was raised from $1627 to $1950, and when they raise the ceiling 20% more in 2 years to 20T, gold's new target will be $2340 within the 2 years after that.
Any country that thinks it can continue indefinitely raising its spending and debt ceiling 20% every 2 years, is on its way to exponential extinction, and gold is inversely discounting the value of that countries currency and debt.
Interesting to see ZH 'consider' that gold 'might be' a bubble (while proclaiming its not, of course.)
I don't know, I just look at what people do and ZH using 'gold' and 'bubble' in the same sentence is suggestive.
There are two factors to keep in mind: In the US there is far more demand for gold than there is physical and the higher the price rises the less becomes available on the market. This is Hotelling's Rule and not surprising.
Because of this there is a large 'paper gold' market leveraged on top of the physical gold market. Paper is limitless and more gold positions can be piled on top of paper gold positions 'ad infinitum'.
When the abstract market grows in size while the underlying shrinks, what do you think will happen? (Hint, look at mortgage financing in 2006.)
Another problem with gold is that it is both a finance asset and 'something else'. Gold is another Wall Street swindle. You say, "Hey, I'm smart, I won't get taken," but the marketeers are smarter than you are. If you are thinking about buying gold for any reason, you've sold yourself, they don't have to do anything.
There is only to lose by holding gold because it must be sold for a cash money profit at some point or the exercise of holding the gold is pointless. Gold is just as much an artifact of bankrupt industrial 'development' as is a Harley-Davidson ... but the Harley is more fun to drive.
The way to value the dollar is the crude trade. A barrel of crude right now is pricey in dollar terms but becoming less so as dollars disappear and deleveraging continues. Right now the dollar is 'cheap' enough to guarantee that industrial economies fail. Is this 'Good for Gold'?
Yup, but after the fail will the gold still command the gaudy premium or will folks' gold trades go belly up like the other finance swindles? Remember, it's not YOUR trade that makes the market, it's always 'the other guy's' trade.
What has been happening is that gold is becoming the 'Crude 2008' trade where asset managers roll out of some other money-losing asset class and into gold (paper gold, which drives up the physical gold price). Price of gold could go much higher, even $3000/oz. What happens next? Look at crude in 2009!
All the paper gold leverage puts real gold as collateral for a ponzi scheme, as it unwinds a lot of the real gold will get dumped onto the market at once. Nobody will have the cash dollars/euros/yen/yuan with which to buy it, because 'currency sucks!' right?
Another fellow who has been saying the same shit over and over for years. You're like Robo, never able to admit when you're wrong.
You sound a lot like Bob Prechter.
Paper leverage will explode when the shorts cannot cover or when an ETF cannot deliver. The underlying price of physical will then diverge from the paper price.
When 58% of all physical is being purchased by China and India and another huge percentage is being purchased by other Asian and Mid Eastern countries the US/Western paper PM game is doomed to failure.
Gold isn't in a bubble. It's in a secular up trend and will stabilize at some very high fiat valuations when (if) fiat currencies stabilize...and, thats one big IF...
The Pan Asian PM exchange is opening the last quarter of this year and it's a real exchange with real rules...watch what happens to the US/London paper PM games then...KabOOm
Er, the paper market has been used to hold gold prices down, not up.
The destruction of the paper market won't result in dumping of physical gold, that is ridiculous, it will create a panic and a ramp in gold prices.
This is not a finance swindle, just the reverse. There has been a multi decade campaign to keep retail out of gold, and aside from advertisements hoping to lure gold bugs into buying gold at ridiculous prices over spot, there is no indication whatsoever of public interest in gold.
You said it yourself, there is higher demand for physical than paper, and yet you think that PMs will pop like the housing bubble because of the size of the paper market? Housing popped because credit popped and the job market contracted. There are no buyers for those houses. Do you really think there will be no buyers for PMs?
Your thinking is all muddled. You are making analogies that don't fit to try to get back to your anchored pre decision, that we are in deflation. In doing so, you are ignoring the printing press. Fiat will go to zero and gold and silver will be the best of the few remaining lifejackets.
This headline from today: Emerging world buys another $10 Bln in gold
http://af.reuters.com/article/metalsNews/idAFL6E7J30EY20110803?sp=true
International Monetary Fund data for June on Wednesday showed Thailand bought gold for the second time this year, raising its reserves by nearly 19 tonnes to over 127 tonnes, while Russia bought another 5.85 tonnes, bringing its reserves to 836.7 tonnes, the world's eighth largest official stash of the metal. So far in 2011, emerging market central banks have bought nearly 180 tonnes of gold, more than double the roughly 73 tonnes purchased by central banks globally in the whole of 2010.Price of gold could go much higher, even $3000/oz. What happens next? Look at crude in 2009!
Might be more instructive to look at the price of gold in Weimar Germany.
and silver will truly go parabolic in relation to gold. when silver crosses $55 watch out!
and oil will break out too, despite the alleged lower demand due to global contraction.
QE3 should drive everything up quite nicely. And when everything finally implodes silver and gold will really break out.
Gold is lagging behind the increase in the US monetary base from September 2008 until today. Actually it was lagging before that. Considering the base is going to continue to explode, it is a buy. At 40:1, so is silver.
Has anyone seen Mathman or the other guy Spaldingsmells?
Who's going to look out for the little guy now?
I live in the corrupt thug state that is China. Gold is everywhere. There are retails shops, jewelery shops, and it is offered as an immediate savings account transfer to physical holdings at many banks such as The Agricultural Bank of China. The banks are advertising gold savings accounts everywhere. I was walking through several pedestrian street underpasses in Urumuqi, definitely not a tier 1 or 2 city, and the subterranean walls were plastered with placards of Gold Bank Accounts.
Why isn't this an option in the U.S.? The banks advertising gold holdings are state banks.
Gold will be in a bubble when every ad on TV, in print, and on billboards is screaming "BUY GOLD".
We're far from from that and 'til then relax and enjoy.
Gold is the ultimate speculative bubble, the ultimate (un)confidence trick by its very nature, that’s not to say it wont keep going up as the dollar keeps depreciating, nevertheless the only logical reason for owning it is that everyone else will buy it in a particular economic phase, namely when times get tough; gold bubbles in hard times, other bubbles in good times. And that will keep happening, until it doesn’t, gold bugs will be right every once in a while and so will normal investors…a stopped clock is even right twice a day. The only difference is that money flows into gold in fear and doubt, and money flows into stocks in the hope of progress - but at least with stock and other developing assets there are varied forms of analysis and ample time to make decisions upon, for the most part when people are deciding any virtues of a company, they use reason and hard nosed analysis on a multitude of factors to make their calls(yes, that can be fucked up), on the other hand when they are diving into metal all they are relying upon is that tradition holds and that enough people are scared enough to keep the price up - the only analysis for gold is an inverse one of the economy going to shit. As this guy proves above, “look how badly things are going, this must mean gold is a good investment“. Will that ever change?
Imagine the first guy to ever find gold - how did he convince his trading partners that it was of any value, and how did he convince himself that it might have been of any value? He was probably a good sales man(in that sense, sales is money too) but most likely, it was shinny. That’s it. That’s all. He could have had no idea that there was a limited supply globally, the only reason he kept it was because it fucking reflected the sun into his prehistoric eye sockets. The only reason his trading partners would have traded anything for it was because they had surplus supplies, and were convinced to store their wealth. Will we always be like those first few tribes, will we always be pandering to those traditions until the human race is extinct? It depends on ones views of moral progress.
The psychological dynamics of that point in time have changed only slightly, while the world has moved on in unimaginable ways. Nowadays people don’t really care much for shiny things, granted some might look at their jewellery and appreciate the colour or craftsmanship in fleeting moments of reflection, but most only appreciate they’re trinkets because of what they represent, I.e. love or commitment for example, or a even a memory. They don’t look at it like ancient generations did, in lust, in wonderment, fascination, it does not represent a new frontier to them, it no longer represents progress. It’s the remnants of a tradition, and to me, this can never represent monetary certainty.
There is no divinity attached to the metal, its not written in the stars that gold is money, its only by flook that we look at it that way today, an ancient confidence trick, no secret, no certainties. You got gold now, then good man yourself, in all likelyhood you will do well in this point in time, but one day, gold will be at most an industrial metal. Technology is the new gold. Only technology is an expression of progress, and hence can never lose it’s appeal. Progress is real money. If you put a gold bar down in front of me, and along side it put a bank of LCD monitors, a powerful computer with excellent software that I am interested in and can utilize to my advantage…I will look at the monitors, I will fucking drool over them, I will ignore the gold, the monitors and computer represent my potential for innovation and progress- when I gaze lovingly at my technology, i probably see what that prehistoric man seen when the gold reflected the sun in his eyes. Its kind of like “arrh, uuuh, ohhh“.
And the purpose of that little soliloqy was what?
Hey Scrath, I have an old Dell I can trade you for some of that barbarous relic.
just got itchy typing fingers i suppose. You can keep the Dell, but if you have any new ideas or inventions you would like to trade for the relic, sure, i'll pay you in lumps of metal.
"Oh the stupidity!"
Now now, behave yourself, don’t mix up stupidity with naivety. So where am I going wrong here dude, I’m all ears? Is it the idea about innovation being more important than physical money, and that increasing the money supply can produce that progress quicker? Or the part about drooling over my technology like cavemen did with gold? (And if you are going to reply, please don’t insult me because it clouds my judgement and that would probably mean your point would fly over my head.)
the goldbugs need to just get over the 'this is a bubble' bs from MSM and buy gold. i dont own gold and i believe that gold isnt in a bubble because when we have 100,000 trillion-aires trying to convert their wealth to gold and there is only the 'same' amount of gold as 'usual' in the world then gold will go to $100,000 an ounce....that isnt a bubble. that is pure supply and demand.
if you are super wealthy and hope to keep some of your wealth then you are an idiot to not have a ton of gold. for regular joes, gold is worthless. cant eat it and sure as hell wont be able to use it to by a pig when the SHTF and there isnt any food around....barter will be king til all this sh^t gets sorted out over the next 50-100 years.
Bubble...Hogwash I say.....
My barometer is this:
When these things change I will perhaps entertain the possiblity of a bubble. Till then I will continue to work to earn FRNs so I can then covert them in to real money.
Deleted duplicate
Anyone here have a line on portable wealth in the form of 24K gold? Like a bullion chain or the like. Money chain easily hidden under a shirt perhaps. I know the asians buy pure gold jewelry as money, can the same be found in the U.S.
i view 14K and 18K as insults to gold and wont buy it unless it is scrap found under spot. I was able to locate half troy oz. yellow gold wedding bands in 999 in the U.S. with a considerable premium over spot, but I feel that would still need to be worn on a chain under the shirt for security.
TIA. KIPPY.
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