Gold is a BUBBLE

[PlayHer Man]

I’m probably going to get attacked for this post because I’m sure some of you have invested in Gold.. but whatever. At least it’ll give those who disagree with me something to think about… (and a chance to get out before it’s too late if you agree).

I think Gold is no doubt a bubble, just like Real Estate and the Dot.com craze. Predicting when the bubble will burst is always tricky. But guess what? One "Golden" rule of investing in ANYTHING is that large bubbles always collapse, always, always, always.

And the gold bubble is no exception. Driven by fears of inflation, devalued currency, economic crises, global instability, as well as the outright hyping of the mineral by many right-wing media talk show hosts, the price has gone from about $300 an ounce in 2000 to around $1,600 today.

Was this a good investment? If you could go back in time and buy it in 2000, yes. Anything after the big gains, well, not so much. For example, if you bought at $1000 a ounce in 2007, you would have been upside down until 2009 and only making money just now. The gold-nuts like to look at price charts that start in 2000, but rarely look back to 1980, as the price shows more signs of volatility.

Gold-nuts will probably get creamed. :kick:

Here are the reasons I think why:

1. The Average Schmuck is Investing In It: I believe it was one of the Rockefellers who said that he got out of the market in 1929 when he heard a stock boy at a grocery store talking about his investment portfolio. When people with no skill or sophistication in investments get into a market, they tend to drive prices wildly higher. The same happened in Real Estate in the last decade... people without the skill or knowledge to make money in Real Estate got into it.


2. People are buying out of FEAR: Fear and Greed are the worst ways to invest, and many gold-nuts are fear driven.. and driven by fear-mongers like Rush Limbaugh and other klowns. Buy Gold Now! they say, or you will be priced out of the market! :crackup: Funny thing, the same argument was made with regard to Real Estate. Fear is the worst reason to buy anything.

3. Gold Prices Have dropped dramatically in the past: In 1982, the price of gold peaked, and every Tom and Jane tried to buy "Gold Krugerrands". Then the price tanked, and stayed tanked for more than a decade. People who got caught up in the hype and fear surrounding Gold back then ended up losing a lot of money on their "investment".


4. Gold costs only about $450 an ounce to mine: An article on gold mining stocks mentions, in passing, that the company is wildly profitable, as their cost per ounce is only about $450. Re-read that last sentence again and again, until it sinks in.


5. All the Pundits Have Called this a Bubble Early On: Few, if any, financial experts have said that the price of gold is rational. In fact, it is just like the Real Estate market, where pundits warned for years that a bubble was taking place. Every day the bubble didn't burst seemed to "prove" that the pundits were wrong. But in a way, it is like predicting when a volcano will explode.

6. The Supply of Gold is Increasing: Some of the most profitable stocks these days are gold mining companies. With $1,600 an ounce as an incentive, they are pulling as much of the mineral out of the ground as they can. And there is a lot of it to pull out of the ground, all over the planet. So every day that goes buy, ounces, pounds, even tons of gold are being produced. Every year, over 80 million ounces are produced (that's nearly SEVEN TONS a DAY or nearly 600 POUNDS an HOUR, nearly TEN POUNDS a MINUTE or nearly 3 ounces a SECOND!)

 

[Darth]

Interesting. Good thing I didn't invest in any gold!

 

[twentee]

right now, .22 ammo, if bought at nearly pre panic prices, you can double your money with at the next gun show. gold is not going back down in price, dude, at least not much. They keep printing more $ to fund their bs welfare and wars. The oil countries want to invest in something that is concealable, portable and worth more than pieces of paper.

 

[taiyuu_otoko]

I don't entirely disagree with you, as just the shape of the price curve itself looks like many other bubbles throughout history.

But unlike other "bubbles" gold is a bit different. It has long (centuries) term value, unlike real estate, tulip bulbs or Mississippi land.

It's hard to separate the noise from the underlying value. It's also interesting to note that the most pressing "bubble" at the time, at least according to several economists, is the bond market.

The value of gold is certainly tied to the value of currency, which are clearly manipulated.

It's also interesting to note that in most bubbles throughout history, their rise and subsequent "pop" coincided with a sudden influx of currency into the economy.

Also, bubbles, or more accurately, "speculative bubbles" are defined as a rise in price because of "speculators," people buying it not for the underlying value, but simply because they think it will continue to rise.

This makes it hard to find unbiased economic news these days, as any "contrarian" or 'non-mainstream" news story ends up being written by some guy who sells a gold newsletter.

I suppose that one could argue that gold has plenty of room to go up, as countries like Germany and China are doing all they can to fill their central bank vaults with as much gold as possible, and the FED is scrambling to "pay back" gold that it's supposed to have in its vaults, but doesn't.

 

[PlayHer Man]

right now, .22 ammo, if bought at nearly pre panic prices, you can double your money with at the next gun show. gold is not going back down in price, dude, at least not much. They keep printing more $ to fund their bs welfare and wars. The oil countries want to invest in something that is concealable, portable and worth more than pieces of paper.

Time will tell.

The way I see it, gold is all about investing based on FEAR.. which is the worst way to invest. Gold peaked at nearly $1900 an ounce in 2012, then fell to about $1600. Since February 2009, it has hardly done better than the market, and this is not taking into account dividends, which Gold never pays.

Like I said.. once the average uneducated bum is investing in something, you ain't gonna make much money on it in the future. Once people on TV are telling you to invest in something... you ain't gonna make much money on it. That's just how it works (if you look at history).

Gold has no inherent value other than for use in electronics, so if Armageddon comes, you can't eat it. You'll wish you bought bullets instead. But the end of the world isn't coming. When people figure that out and all the fear fades, the price of gold will drop...again.

Every day, they dig LOADS more gold out of the ground. Almost like printing money.

Maybe history won't repeat itself this time... lets see.

 

[twentee]

I never said that it was a good way to make money. Most people only think of gold as a place to put maybe 10% of their liquid assets, as a hedge against hyperinflation. When enough people think like that (and they SURELY DO today), the price of gold goes up. gold has went up 4x in price since 2004, dudes. that means that the rest of the world thinking that the US dollar is worth 1/4 of what it was worth 8 short years ago.

 

[PlayHer Man]

Playher,

If you look at the movements in gold from 2000 to present (13 years so far out of a normal 18 year secular bull market), you see that gold normally moves up to new relative highs, only to consolidate in the new range for 18-24 months. It is actually quite standard to do so and proves nothing as far as gold being in a bubble.

Also note that there are FAR more places trying to get you to sell your old, broken, unwanted gold, than there are trying to get you to buy gold.

Now, some important metrics to keep an eye on.

Dow:Gold ratio moves in a pattern that demonstrates the cyclical nature of secular bulls and bears. Note that we have not yet reached the typical ration of 1:1 or 2:1. When we do, that will be a strong signal to get out.

Also note, that since Paper and Commodity Bulls tend to run opposite of eachother (Dow does well when commodities to poorly, and vice-versa), one can use the average PE ratio at the bottom of secular bears to help identify the top in gold.

These two metrics, alongside knowing the typical length of secular bulls and bears from my original Zeal link, should give enough indication that the commodity bull is not yet over.

Add into that the fact that QE is not going away anytime soon, Japan is printing like crazy now, the EU is in shambles as the banks and countries cannot find a fix, and the treasury yields simply cannot rise in the US at this point without bankrupting the country......well, the only option is to print, or to default. Both of which are very bullish for gold.

Gold will crash hard, but not for a few more years yet.

The fat lady won't be warming up until

• 
  [*]Gold cracks $2,500 per ounce
  [*]Taxi drivers are giving you tips on what gold stocks to buy
  [*]Mr T is wearing gold chains all over the place again
  [*]The stock market is declared "dead"
  [*]There is a feeling of dread in the nation like things will never improve again

We will get there eventually, but the pendulum still has to finish swinging to the extreme first.

Great post Danger. Lots of truth.

Still, I think an increase in value from $300 an once to $1,600 an once is definitely a bubble. So I would consider gold to be in a bubble right now.. even if the bubble is still growing.

Depends on how you define bubble I guess. Here's the deal: Like the price of stocks, what the last buyer is willing to pay does not represent the real value. Just like with Real Estate.. hype made home values go beyond their true value. This is what I call a "bubble".. prices based on HYPE and EMOTION rather than real value. This is where gold is today = overpriced.

Most people, during the peak of the Real Estate market, where not interested in selling. Many argued there was no point in selling because if they sold, they would probably buy another house... and since all houses were priced alike, they would not "cash out". And of course, another reason many people didn't sell when prices were high was that they were convinced prices would go even higher. The same thing will prevent the gold-nuts from getting out in time, before that market too, collapses. :yes:

You're probably right that gold won't crash.. lets say.. tomorrow. However, the time to make BIG money with it or invest long-term has ended. The time to buy was 2000 and the time to sell was either 2012 or sometime in the near future.

 

[Falcon]

Gold has no inherent value other than for use in electronics, so if Armageddon comes, you can't eat it. You'll wish you bought bullets instead. But the end of the world isn't coming. When people figure that out and all the fear fades, the price of gold will drop...again.

Are electronics not important?

The truth is Gold becomes the de facto currency when fiat currency fails: http://www.youtube.com/watch?v=7ubJp6rmUYM

Even in Armageddon, people need to trade because it is more efficient than straight barter.

Of course there are risks in buying gold and people who do usually don't but much. But it's hilarious to see the other extreme, people who keep bashing gold buyers like they are stupid, calling them gold-bugs on TV and whatnot. There are far more dangerous bubbles around, including the bond bubble. You also got slaughtered too if you recently invested in Apple. If you're going to hate on bubbles, spread the hate around

 

[PlayHer Man]

Are electronics not important?

The truth is Gold becomes the de facto currency when fiat currency fails: http://www.youtube.com/watch?v=7ubJp6rmUYM


Even in Armageddon, people need to trade because it is more efficient than straight barter.

Actually food and water does. The majority of the world population doesn't own gold and most gold isn't sitting around in people's homes ready to use. Therefore, if Armageddon happens.. most people won't be trading gold realistically. Not when most of it is stashed away in vaults. If you have it in your home you'll probably get robbed at gun point (why I said its better to invest in bullets if Armageddon is your fear ).

Of course there are risks in buying gold and people who do usually don't but much. But it's hilarious to see the other extreme, people who keep bashing gold buyers like they are stupid, calling them gold-bugs on TV and whatnot. There are far more dangerous bubbles around, including the bond bubble. You also got slaughtered too if you recently invested in Apple. If you're going to hate on bubbles, spread the hate around

Of course you you got slaughtered if you bought Apple. :crackup: :crackup:

ANY TIME you invest based on what the TV tells you.. you'll get slaughtered:

-Facebook
-Real Estate (2005-2008)
-Dot.com craze (1995-2000)
-Real Estate Again (1986-1989)

If the average uneducated Joe knows about it.. you're too f*cking late! The time to buy Apple stock was the 1990's. That's why most people will never get anywhere investing in ANYTHING. They will always jump in when its "popular" which is when the SMART people are selling.

Often the "smart" people cause the hype to drive up prices so they can CASH OUT on bubbles.

Here is how it works:

Its similar to how you bankrupt a business for profit... Make money by not paying any of the bills like the rent, the light, the suppliers, the payroll, the withholding, etc. But keep selling inventory and ordering more, using the company's credit. Then pocketing the cash tax-free. Any business that is tax-free ends up being pretty profitable.

Since you are basically selling off the inventory at 100% profit, you can take hundreds of thousands of dollars out of the business. Then suddenly a "fire" happens or the business goes "bankrupt". You take the cash and RUN. The business "fails" as far as people can tell. But you're rich.

How did that happen? Hmmmm...

This is the kind of "education" they don't teach you in college. This is why many people are well "educated" and still clueless. There is a lot of "street smarts" in finances that most people are oblivious too, but the rich know very well. They take advantage of public ignorance. They tell people the sky is falling so they will run out and BUY what they are trying to SELL. :crackup: :crackup:

Good financial advice isn't given out freely on TV or other mass media. Its given out in private meetings in basements and cars. If TV is where you get your advice, you'll never get ahead with investing.

 

[Burroughs]

-Facebook
-Real Estate (2005-2008)
-Dot.com craze (1995-2000)
-Real Estate Again (1986-1989)

If the average uneducated Joe knows about it.. you're too f*cking late! The time to buy Apple stock was the 1990's. That's why most people will never get anywhere investing in ANYTHING. They will always jump in when its "popular" which is when the SMART people are selling.

The entire stock market is a giant ponzi scheme that most people are too stupid to understand

and they are kept stupid by all the force of the state, church, and media...keep watching tv biyaches :crackup:

but then the only thing the stupid public doesn't believe is *conspiracy* theories

 

[Falcon]

Actually food and water does. The majority of the world population doesn't own gold and most gold isn't sitting around in people's homes ready to use. Therefore, if Armageddon happens.. most people won't be trading gold realistically. Not when most of it is stashed away in vaults. If you have it in your home you'll probably get robbed at gun point (why I said its better to invest in bullets if Armageddon is your fear ).

Well, food and water can't be a currency, at least practically. They are necessary for survival but don't make good currency. There are characteristics that make something a good currency. You can't carry water in your pocket and food spoils. If you thought gold was plentiful, water is pretty much everywhere.

http://www.slideshare.net/Geckos/uses-and-characteristics-of-money-presentation

Gold has been history's choice because it has special characteristics. It's one of the most stable metals we know of. It can be recovered from shipwrecks from hundreds of years ago and still look untouched. Easily malleable and divisible into smaller units. It's durable and wont freaking evaporate on you. Oh yeah, and it just plain looks good.

I don't really buy your Armageddon scenario, either. Sure, you need to protect yourself in that kind of environment, but in times of crisis, the majority of human beings don't attempt to plunder and kill everything they lay their eyes on. Human beings are pack animals, and still need to operate in groups. The establishment of currency happens naturally out of convenience, not artificially. I mean, explain the video from my earlier post then... because that actually happened, and it was recent. Anyway, I think you watch too many Mad Max movies

 

[goundra]

people won't be doing anything but killing and hiding if shtf. there will be no trading at all, for the first year or so People will just TAKE what they need, because they can't risk being shot, blown up or poisoned during an exchange. Not only do they need what you are willing to trade, they need your other stuff, too, and they need YOU GONE. They need the resources that you'd be using up, and they need the risk of your harming them removed. I can stalk/kill many people per day, in decent fighting terrain, if I so choose. So the 'mere" 1% of the population that can handle that sort of thing will be PLENTY to mop up what the general looting, fighting, diseases, starvation, bad water, etc, have not killed.

a year after shtf, the population will be thinned out (ie, 90-99% dead and gone) that barter of useful items will begin again, but don't expect gold to have any value for a while after that, either.

 

[Falcon]

people won't be doing anything but killing and hiding if shtf. there will be no trading at all, for the first year or so People will just TAKE what they need, because they can't risk being shot, blown up or poisoned during an exchange. Not only do they need what you are willing to trade, they need your other stuff, too, and they need YOU GONE. They need the resources that you'd be using up, and they need the risk of your harming them removed. I can stalk/kill many people per day, in decent fighting terrain, if I so choose. So the 'mere" 1% of the population that can handle that sort of thing will be PLENTY to mop up what the general looting, fighting, diseases, starvation, bad water, etc, have not killed.

a year after shtf, the population will be thinned out (ie, 90-99% dead and gone) that barter of useful items will begin again, but don't expect gold to have any value for a while after that, either.

It's amazing the great lengths people will go to try to discredit the idea of gold acting as a currency when history proves them wrong over and over.

Again, watch this video, and tell me how this is possible if you are right: http://www.youtube.com/watch?v=7ubJp6rmUYM

People are starving, and pushed to the brink... in crisis. Yet they aren't running around shooting each other up. They are digging for gold and using gold to trade. This footage is from real life, not some incredible and very unlikely shtf idea that you fantasized in your head that was more likely straight out of a movie or computer game (you play fallout?)... that you are the chosen 1% surviving in some wasteland, please dude

Not to get too far off track in this thread. There definitely are major risks in buying gold, but some of you are taking it way too far.

 

[Mr.Positive]

Gold is not an investment. It is a store of value. Gold and silver have been used for this purpose for thousands of years.

When the gold price goes up, people think gold is in a bubble. It's not, it just means the value of paper currency is going down. If gold goes to $2500 an ounce and beyond, gas will be $5-6 dollars a gallon, food will be more expensive.

Gold is also the only true international currency. Say gold goes up $100 in one day, but priced in Euros it stays the same. That is the dollar getting weaker.

Never buy gold as an investment. If you think all this rampant money printing is going to keep going, protect your hard work and purchasing power. If you think the government is going to start being fiscally responsible, invest in dollar denominated assets, stocks, etc.

Ideally, do some of both. Having gold for a rainy day really is just another form of insurance. I have car insurance to protect my car. I own some gold to protect myself financially.

 

[goundra]

shtf has never hit this earth the way it's going to. I do believe gold will have value again if shtf, but not for a WHILE after shtf 2-3 years at least. and until shtf, gold is a fine hedge against inflation. as I said. Apparently, u don't read too well. gold is fine up to a point, but you'd better ALSO have pretty advanced "infantry type" skills and gear, food stashed, etc. Cause gold won't protect you once things really go to hell.

 

[Falcon]

shtf has never hit this earth the way it's going to. I do believe gold will have value again if shtf, but not for a WHILE after shtf 2-3 years at least. and until shtf, gold is a fine hedge against inflation. as I said. Apparently, u don't read too well. gold is fine up to a point, but you'd better ALSO have pretty advanced "infantry type" skills and gear, food stashed, etc. Cause gold won't protect you once things really go to hell.

The scenarios you are describing are so unlikely you have to question is it really worth the preparation. There's probably a greater chance a meteor would come down and wipe out 99% of human life ... in that case, your "infantry skills and gear" wont mean anything. The only that can save you from something like that is a deep underground bunker, etc. But does it mean that it is worth building some grand bunker and being that prepared? Most people come to this site to get good with women, not prepare for the Apocalypse. You only have so much time in your life, and only a fraction of it you will be in your prime and 100% healthy. Is it really worth to spend it worrying and preparing for something that may not even happen?

 

[goundra]

no, it's not

ALL societies have collapsed, at one point or another. 99% of humankind has never been wiped out (before) unless it was perhaps back in pre Neanderthal days. there'd be archeological and geological evidence if it had, and what evidence we do have shows the reverse.

 

[DanZy]

ALL societies have collapsed, at one point or another. 99% of humankind has never been wiped out (before) unless it was perhaps back in pre Neanderthal days. there'd be archeological and geological evidence if it had, and what evidence we do have shows the reverse.

Entire civilizations have died out, we're currently one massive global civilization. You're going to die in the next 5 years anyway, the perks of being old and all.

 

[donking]

bitcoin is a bubble. f'ers quadrupled in 2.5 weeks.