Posted on 06/25/2010 7:18:21 AM PDT by SeekAndFind
While a few mainstream outlets are coming around to at least acknowledging gold’s stellar run, most remain skeptical or outright bearish. And the blasphemy they purport is that gold is in a bubble.
Let’s settle it, right now, and shut these naysayers up.
Gold returned 10 (and as much as 14) times your money in the 1970s bull market, and the Nasdaq advanced over 1,900% during its run. Our current gold price is up about 400% (when measured on a daily basis, not monthly as in the chart).
In fact, the Nasdaq gained 182% in the final year of its peak, and gold surged 80% in four weeks during the blow-off top of January 1980. None of this is happening to our current gold price.
Note to doubters: we’ve got a long way to go before we start legitimately using the “bubble” word.
Besides, the fact that these skeptics aren’t buying – and don’t even own any gold in the first place – is further proof we’re not in a bubble. Ever notice none of them claim to own it?
And they definitely need to catch up on world affairs. The World Gold Council (WGC) reported that Russia, Venezuela, the Philippines, and Kazakhstan all bought gold in the first quarter. Central bank sales, meanwhile, remain depressed.
Russian President Medvedev won’t quit his quest to move international reserve assets away from the dollar. And his country’s central bank is backing up his words; it increased its gold reserves by $1.8 billion and decreased its currency reserves by $6.6 billion so far this year.
China, the world’s largest gold producer, already buys all the gold produced within its country. But the WGC recently forecasted that overall gold consumption in China could double in the coming decade, a demand that production certainly won’t be able to match.
The Iran/Israel showdown appears closer almost every week. As further evidence that each side is preparing for conflict, Saudi Arabia recently agreed to permit Israel to use a narrow corridor of its airspace to shorten the distance for a bombing run on Iran – all done with the agreement of the U.S government. Simultaneously, the UN Security Council imposed a new round of sanctions on Tehran. Nobody appears to be backing down.
And the current run in gold is with no inflation. Core CPI has fallen to the lowest level since the mid-1960s – but what happens when inflation does set in? And what if it’s as bad or worse as the 14% rate we got in the ‘70s? Sure, deflation is the immediate concern, but with a U.S. federal debt of $13 trillion, unfunded future liabilities exceeding $50 trillion, and a current budget deficit of over 10% of GDP, a massive debasement of the dollar is virtually ensured, triggering an onslaught of inflation. It’s coming.
With all these concerns, these guys don’t want to own gold?
Bubble, schmubble. Stocks are vulnerable, bonds are toast, currencies are fiat. Other than cash, where are you going to put money right now?
Gold could correct, of course, and I frankly hope it does. I’m not counting on it, though. The price is just as likely to head the other direction. But if it does temporarily fall, while the bubble-heads are smirking, I’ll be buying.
Someday I think we’ll be reversing roles
Truly laughable!
They don’t understand what a ‘bubble’ even is.
The beauty of capitalism is that every investor can invest based on his own expectations.
Some may think gold is going up - others may think gold is going down.
The investor who is correct is rewarded and the investor that is wrong is punished.
Capitalism does not work as well when governments interfere and bail out the losers (bailouts) or overly tax winners (windfall profits tax).
That merely discourages the basic beauty of capitalism.
LOL Heads it goes up, tails it goes down.
I just love it when prognosticators try to have it both ways.
Your premises are generally correct, but you are incorrect in one aspect. In regards to purchasing Gold at this time (last year to presently), many are not buying it as an investment thinking it will continue to rise in present dollar value. Many, like myself are buying it because of it’s relative dollar value stability. In other words, if the economy collapses and/or the currency suffers drastic deflation gold will hold it’s relative value quite well because it is considered or would be considered, a safer form of value to trade wior th. Conversely, if inflation gets out of hand, gold holds it’s relative value quite well. Demand for gold rises with economic insecurity. Most assets or investment vehicles do not.
Such a definitive statement demonstrates bias
Absolutely correct, and well stated.
All it sounds like to me is a handful of fools that failed to buy gold when common sense dictated that one buy gold, and are crying out in pain at the obvious impending catastrophy.
They let their baseless hollow ideology control, and now see the future closing in like a D-11 heading up their driveway.
.
Here’s an old favorite Freeper post on the topic:
Jiggyboy:
Let’s review why gold is not in a bubble:
- Nothing can be in a bubble unless it is well past the previous inflation-adjusted all-time high
- Gold regularly drops up to ten percent in three days or less and once dropped more than twenty percent nearly without a break in 2008. Bubble price action goes one way.
- In every case, gold “corrections” have taken weeks and months to recover. Bubble price action is exponential — not a grinding, grudging “recovery”.
- It is almost a commodity, yet supply is not readily available. That’s a supply shortage, not a bubble.
- Boiler-room companies (i.e. cash4gold) are begging the masses to sell to them, not to buy from them
- CNBC is still bashing goldbugs instead of worshipping them
- We haven’t seen a TIME or Business Week magazine cover with a cartoony John Q. Public engaging in borderline-sexual acts with Lady Liberty from the Saint Gaudens Double Eagle
- Nobody you know, knows what Lady Liberty from the Saint Gaudens Double Eagle looks like
- Hollywood hasn’t yet made gold-related TV shows, movies, etc.
30 posted on Thursday, March 12, 2009 11:38:49 PM by jiggyboy (Ten per cent of poll respondents are either lying or insane)
I’ve read articles lately that suggest the true price of gold, or any commodity is the approximate cost to mine it.
Any variation from that price is due to market forces, i.e. supply & demand, speculation, etc.
Today’s approximate cost to mine gold is $450 per oz.
It appears that supply & demand and speculation, are setting the rest of the price.
Traditionally gold is a hedge against economic uncertainty and inflation. We have lots of economic uncertainty, but not much inflation.
Who cares if gold is in a bubble or not?
As we all have learned, markets can remain irrational longer then someone can remain liquid.
My only concern for those who are smitten with gold, is it’s had a very nice run, and NOW people are popping out of the woodwork STATING how it’s going to go higher.
Sort of like when oil hit over $140 a barrel and Goldman Sachs came out and STATED it was going to $200. The next day oil began to fall and didn’t stop till it was below $30 a barrel.
If gold is in a bubble, then there are people who want out, and the best way to get out is to hype the crap out of it, to get the last few suckers to buy at the inflated price, thus providing the liquidity for the manipulators to get out.
Remember the internet bubble? Where wire house brokerage firms were agressively touting buying internet stocks to their customers, while secretly telling their friends and insiders to sell?
Do what you think is best, but I highly suggest you do your own research and see if your investment make sense.
Good luck all.
ping
Goldbug ping
(I thought I had pinged this already but I was thinking about a different article. Well, it has a little more authority on a day that gold gets smacked down a full percent in ten minutes — twice — just after the big G20 meeting I mentioned a couple of times last week as a potential smackdown attractor.)
Mail me to get on or off the Free Republic Goldbug Ping List.
That guy’s pretty good short-term too. :-)
A fine post. It was obvious no later than 2006 to many both here on FR and in the general investment community that Fannie Mae, Freddie Mac, Countrywide, et al were dead men walking, yet the stock prices of those companies were more or less at all-time highs until they officially collapsed in a heartbeat in late 2007.
A corollary to the old adage about irrational markets and personal solvency is that “they” can paper over the problems in so many ways and for so long, that normal rules of investment and even short-term speculation don’t apply.
......the current run in gold is with no inflation......
Or, the run on gold is inflation.
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