GOLD PRICES STILL FAR FROM REAL RECORD HIGHS
The chatter of a bubble in gold is gaining more and more momentum and while I believe there is a high probability of an irrational bubble forming in gold we are still far from being in bubble territory. If you consider gold in real terms we’re still 91% from the all-time highs (via Bloomberg):
“The CHART OF THE DAY shows the gold price relative to January 1980, when the metal reached $873 an ounce. Yesterday’s record close in New York trading equals $454.88 an ounce in real terms, reflecting an increase in the U.S. consumer price index, according to data compiled by Bloomberg.
Gold would have to rise above $2,435 an ounce to exceed its high from three decades ago, based on the CPI’s current reading. That’s 91 percent higher than the closing price of $1,272.20 in New York trading yesterday.”
Source: Bloomberg
just like this is the beginning of credit crisis (tho i will give you its close to the end of the beginning) its the beginning of golds run.
like it love it or hate it.
This chart is often wheeled out to illustrate why gold is not in a bubble. Call me kooky, but I’d be grateful if anyone could explain to me why gold HAS to surpass its all-time high ‘adjusted for inflation’?
Is there some stock market law which states that ‘even though an asset is trading 50% higher than its nominal all-time high, has multiplied eightfold in ten years and is clearly in a parabolic rise, it shall not be deemed to be in a bubble nor to have peaked until it reaches a high ADJUSTED FOR INFLATION’? Careful folks…
Oops, correction – it’s only multiplied FIVEfold, it was the 1980 bubble that multiplied x8. Obviously, that must mean it has another 3x to go…right?
There are one or two perfectly good reasons left to buy gold, but let’s not kid ourselves we’re not in a bubble. Take a leaf out of Soros’s book, buy the stuff and ride the rocket, just keep your finger hovering over the ejector button.
Another way to think about it: since 1975 gold has only reached these levels twice before – during the build up to, and subsequent pop of, the last major gold bubble.
There is no fever like gold fever!
It’s certainly making it’s way up towards a bubble, but like countless other bubbles (NASDAQ, OIL, NIKKEI, etc) they typically explode and multiply about 15x – 20x over a span of 10-15 years before crashing. (the 70′s rush went from $35 and multiplied 20x)
Obviously no science here, but if that’s a yardstick we could well see $4,275 – $5,500.
Paper bugs need to get a clue
Gold broke out 250 years down trend in real term since… 1970, when the mother of grand experiment of printing press started.
So just think about the fact that 70s was not a cyclical blip, but beginning of something much bigger, you know we have long long long way to go.
I don’t think it is too bold to call 100 years bear market in paper, and zero is the only destination.
I can’t understand what you’re writing.
i understand
GLD had almost a billion inflows in August
http://seekingalpha.com/article/225201-emerging-markets-precious-metals-lead-august-etf-inflows
This sucka’s getting crowded. But im not crazy about fighting this wild bull head on.
The ultimate trader’s market.
No real way to value it except for what someone will pay for it. Could be worth alot, or nothing.
Sick.
Find that greater fool Scharfy….
Gold is remindful of real estate where less people were no longer buying as a residence but to flip them. See the second chat at http://www.economist.com/node/16536800?story_id=16536800, Balancing the ounces. Every year, more Gold is bought for investment purposes, less for actual use.
Like you all, watching the balloon get bigger.
I see this all ending very badly at some point. Of course, as long as there is chatter about Euro sovereign debts and QE here in the states there will be buyers of gold. Once this whole debt crisis is over, however, watch out below….If we get a bubble before that it will end quite badly….
So gold is not anti Euro play anymore? Now it is Chinese demand play,huh?
I am wondering when you guys will set it straight, GOLD IS ANTI DOLLAR PLAY, rising gold means dollar is devalued, plain and simple.
I find it amazing that the “gold bubble” talk continues…
May I suggest there are a bubble of “bubble finders” in this country.
May I also suggest that the real bubble is in government bonds. Keep watching that my friends. That’s a big deal and the rise in gold is merely a response.
Once this whole debt crisis is over, TPC? When is that, exactly? After they increase the money supply by a few dozen trillion or so over the next 10 years?
Y’all enjoy holding those FRNs. I am quite sure they will purchase as much in 10 years as they do today.
That was the object of a recent DB sell side research note…never been keen on sell side research even though some arguments are sound. One of their argument was the impact of physically backed gold etf. Additionnally, gold producer have been de-hedging (http://www.gfms.co.uk/publications_hedging_report.htm). DB note was also , on top of providing inflation adjusted prices, providing relative prices (vs base metals, relative to per capita income, versus oil, vs sp500) and averaging all this to obtain a graph that look like the one that TPC has choosen. The current price/max price was equal to approx. same figure.
Is this a sign of true deflation; not enough buyers to a[pproach the time value?
When the supply from Rep. S.A. stops there may be some significant shortage of supply until new production from Russia kicks in.
Adam Smith rules.
Some logic for gold to rise:
1. American debt 13 trillion and going up.
2. American unemployment – official 9%, unofficial 20-25%.
3. Bank closures increasing in America – Increasing, not decreasing.
4. America taking from Paul to pay Peter (printing more dollars).
5. American manufacturing in China due to the profits acting as the middleman for the biggest cut of profits (direct labor is required for real money to be earned) Now job creation suffers and cannot increase.
6. China wants a gold based world wide currency and has set its mind to it.
7. Gold is the biggest transact between reserve banks daily and globally, i.e $22 billion a day – compare to oil $12 billion a day.
8. Gold demand increasing at a rapid pace, yet not a lot of it around, maybe one olympic size swimming pool full, historically mined.
9. ‘A barbaric relic?’ (a generalisation and diversion and semantic profile given by players that are used to paper based with no value at all (only trust in the system) – no promisary guarantee on notes given anymore, therefore it is only worth as much as what it is, i.e nothing).
10. Gold has stood the test of time – nations funded their wars, kingdoms etc on gold from the beginning of time – history repeats itself.
11. China was one of the first to expose the tungsten coated gold bars, can you now blame them and anyone else for requesting physical delivery of gold? Increasingly so, individual countries are doing the same – thus, reducing the amount of gold for manipulating. This means that China understands how the Western bankers have manipulated gold for their own benefit and caused the financial meltdown of 2007/08.
12. My money is on China on being the victor versus the Western bank manipulators (printing and inflating worthless paper) establishing a gold based currency. Eventually they may go the same way, however, at this point of the game it is the best game in town for a long, long time!