[Prince Caspian]

One could consider everything to be a bubble. Either a convex bubble or a concave bubble. Absolutely nothing is perfectly smooth or exactly where it should be at any given snapshot. So all these convex/concave bubbles create a textured surface of the whole that is larger and more complex and with more variables and unknowns than anyone can get their head around. Each person has his or her own partial view (or agenda) in which he is emotionally (financially?) invested and therefore defends to the death. But the bottom line is that no one really knows much of anything when it comes to predicting what's happening next. (Not that there's anything wrong with that...).

[Pelham]

Some bubbles aren’t that hard to spot. Timing them is another matter. Using traditional valuations I suspected that SoCal real estate was in a bubble in 2003. By 2005 I knew that prices here were unsustainable, the incomes of borrowers weren’t sufficient to handle the loans that they were taking out. But the top wasn’t in for another year or two.

With gold there isn’t the sort of outside metric like those which you can apply to real estate investing. Calling a bubble in gold is more subjective. What is driving gold is a lack of confidence in currencies, greater wealth in China and India, near-zero interest rates, a dollar carry trade, and a self-reinforcing belief that gold is going to go up. Breaking one of these trends probably won’t pop gold’s bubble. But if a couple of them reverse then I think we will see a dramatic decline in gold.