Before jumping on gold be sure to watch this chart

[golfguru]

If purchased during the previous bubble, gold has returned nothing
to protect against inflation. The chart clearly shows that it is not
safe to buy gold after a parabolic rise.

[hlthe2b]

1. Buy high....

Sell low... :crazy:

[rfranklin]

3. Better yet, sell high and then buy low...

AKA shorting...

[sudopod]

2. kick nt

[dkf]

4. Nice chart. Where is it from?

[golfguru]

8. From crosscurrents web site n/t

[slipslidingaway]

9. Link to site ...

http://www.cross-currents.net/monthly.htm

[rhett o rick]

5. I look at gold as insurance for a calamity not an investment. nm

[golfguru]

6. That is perhaps the only reason to own some gold

As an investment, it is better to buy gold when 30 to 40% below previous highs. Also, gold does not generate monthly income stream as a dividend paying stock can.

[rhett o rick]

7. I agree. Dollar cost averaging helps. nm

[Taitertots]

10. Gold is good for Speculators, not Investors

If you bought it, now is the time to sell it. If you didn't buy it, don't.

[roamer65]

11. I'd rather own gold than dollars right now.

The Federal Reserve is actively debasing our currency right now. They cannot debase gold.

[Yavin4]

12. What Happened From 1980 to 2000? Here's What Happened:

1. The dollar was strong because Volker and the Fed in 1980 raised interest rates 20% which killed off inflation.

2. We saw labor prices (wages) plummet because unions were effectively destroyed in the U.S., esp. private sector unions.

3. We saw incredibly cheap energy which also curtailed inflation.

4. From 1988 to 2000, the U.S. pursued balanced budgets. Starting with Bush I and continuing with Clinton, the U.S. raised taxes and cut military spending and pushed the govt. briefly in balance. Then later into surplus.


What happened from 2001 until now:

1. The Fed placed interest rates at historically low levels from 2001 to 2004. Then because of the housing collapse, the Fed pushed rates to 0 which is where they stand now.

2. The govt is completely out of balance and running huge surpluses.

3. Unregulated financial markets has exponentially increased systematic risks. When BOA falls, and it will, it will wipe out stocks.

4. The U.S. economy is too weak and has no ability to re-pay it's debts.


Looking at charts without understanding the fundamentals behind the movements is like betting on a football team because of their uniforms.

[golfguru]

13. If US gov't goes belly up,

the whole world goes belly up, especially China.
There will be no one left with resources to buy anything.

If BOA goes belly up, depositors are covered upto $250k for each account.
Only losers will be stock holders and executives. Other banks will take
over BOA business.

US gov't is unlikely to go belly up so long as ink & paper are available.

Main reason gold has gone up is because major countries are buying gold
instead of sovereign bonds. But that stockpile earns zero interest. When
gold bubble busts (every bubble comes to an end) the same countries will
be forced to unload.

My best guess is they all will just monetize the debt, no major country
will go belly up.

The chart is useful to realize the parabolic nature of gold price rise.
Nothing, repeat, nothing stays parabolic for ever. And the chart also
makes it clear, people who bought gold during the previous bubble have
gained nothing in buying power.

[Yavin4]

14. It's Not The U.S. Govt That Goes Belly Up. It's The Currency That Gets Inflated.

Gold is not going up per se. Rather, it's the purchasing power of your dollar that's declining.

When BOA collapses, it won't just be the stockholders and bondholders that get hit. It will be all of the other counter parties to derivatives that BOA owns, Merrill Lynch owns, Countrywide, etc. We have no idea of how many other major players will also get wiped out in a BOA collapse.

"US gov't is unlikely to go belly up so long as ink & paper are available."

And that's exactly where gold is getting it's value from. Inflated U.S. currency.

Main reason gold has gone up is because major countries are buying gold instead of sovereign bonds. But that stockpile earns zero interest. When gold bubble busts (every bubble comes to an end) the same countries will be forced to unload.

No, the main reason why gold is soaring is because whomever holds dollar denominated debt is getting paid back in a currency whose value is dropping every day. Step outside the U.S. Go to Europe and see how far your dollars take you.

The chart is useful to realize the parabolic nature of gold price rise. Nothing, repeat, nothing stays parabolic for ever. And the chart also makes it clear, people who bought gold during the previous bubble have gained nothing in buying power.

Again, a chart without context is useless. From 1980 to 2000, we pursued a strong dollar policy. We didn't have globalization. The budget deficit was tamed. Financial companies were well regulated. There were no derivatives. All of that changed dramatically starting in the late 90s.

The only way that gold will start declining in price is when the dollar gains in value, and that will take balanced budgets, higher interest rates, and bank defaults to happen.

[golfguru]

24. Arguably the origins of financial funk can be traced back to repeal

of Glass Steagall. That is what made those MBS derivatives possible for banks.

[Po_d Mainiac]

21. If BoA'holes goes tits up, where's the money gonna come?

And there are several types of accounts that are FDIC/NCUA 'insured' (so-called) well in excess of $250K

[Yavin4]

22. BOA Will Get Divided Up By the Other Banks. Depositors Will Be Okay.

The real issues are the counter parties to Countrywide's and Merrill's debts. Fannie and Freddie have already filed suit against BOA.

[Po_d Mainiac]

36. FDIC is gonna a bundle of cash

to send along with the $1T in deposits...More $ than they have on the books, and more than treasury can pump in without raising the debt ceiling.

One thing that finally happens when a bank gets shut down..Assets get marked to market...Troubled asset ratios fly of the charts..

As for the counterparties...I doubt any expect to get a cent from BAC/ML/CFC. Now it's just a rush to collect a few pennies on CDS before the contagion bleeds out the underwriters.
YMMV

[abelenkpe]

17. Running huge surpluses? Nt

[Yavin4]

19. Did I say "Huge Surpluses"?

I wrote: "Starting with Bush I and continuing with Clinton, the U.S. raised taxes and cut military spending and pushed the govt. briefly in balance. Then later into surplus."

[abelenkpe]

26. No the 2001 till now

"2. The govt is completely out of balance and running huge surpluses."
Don't you mean deficits?

[Yavin4]

27. typo: meant deficits

My apologies.

[Po_d Mainiac]

20. me thinks u wanna rephrase #2 n/t

[brooklyn297]

38. interesting

[dixiegrrrrl]

46. Well said.

[Art_from_Ark]

58. "Looking at charts without understanding the fundamentals behind the movements

is like betting on a football team because of their uniforms."

I agree.

BTW, I like your avatar-- the reverse (tails side) of the American Gold Eagle.

[pscot]

15. I'll see your chart, and raise

with this one:

[golfguru]

16. Great chart but won't happen here

There was no internet then, people could be kept in dark easily.
Also there was no 2nd Amendment in Germany.

[pscot]

23. I used to believe we'd never have to worry

about that sort of thing. But things really are different this time. This country isn't quite ripe for a demagogue, but we're getting there. The firm is being mismanaged to fare-thee-well. I can easily imagine a situation so chaotic that the public demands a Strong Man. I don't see us getting another Roosevelt this time around.

[Art_from_Ark]

50. Um, there were plenty of guns in Germany after World War I

Lots of guns.

But what does gun ownership have to do with hyperinflation, anyway?

[OllieLotte]

18. GG...I'm laughing as I'm typing this.

This time it's different. Actually, I really do believe that it is.

[golfguru]

25. They said the same thing during Housing, Tulip bulbs, Internet stocks,

Nasdaq stocks, last gold bubble of 1979, sugar during 1950's in India,
silk worms in Japan, Malls construction in China today......it was always
thought the prices would never stop ascending. If gold bubble never bursts,
it will indeed be the first time in history of civilization.

Already the political winds are blowing against more stimulus spending.
Even the Federal Reserve is divided on more QE's (Quantitative Easing).
I envision two scenario's. One would be rational fiscal policy which after
a long period of healing would restore the economy. Another would be roaring
inflation by printing more dollars which will lead to another depression.
If inflation is the right cure, Zimbabwe should be the top economy in the
world.

The two things common between all bubbles is that no one can predict when
the bubble will burst, and second, that the bubbles always have burst.

[Yavin4]

28. Again, Gold Is Not Rising, The Dollar Is Losing Value

If the Fed raises short term rates, then the banks would default as well as millions of consumers. It would trigger massive deflation which would be very positive for gold.

If the Fed continues its policies, it would inflate the currency which is also good for gold.

What would make gold prices decline is if the U.S. economy experienced record growth, with high employment, and rapidly growing wages. This would get the housing market out of the doldrums, and that would mean trillions of dollars in bank debt turns positive. It would also mean that the U.S. govt would bring in higher tax revenues and pays down on its debts.

Over the next 3 to 5 to possibly 10 years, do you see the U.S. economy having that kind of record growth?

Also, the bubbles that you love to cite were based on an irrationality. The tech bubble was driven by poor business models which had no chance. The housing bubble was driven by giving mortgages to unqualified buyers.

The world knows this, and they're buying gold to protect their wealth.

[OllieLotte]

29. I believe this as well.

Not only are they printing a lot of dollars, but other countries are doing the same thing in a race to to the bottom. Having 10% of your assets in precious metals doesn't seem unreasonable under these circumstances.

[golfguru]

31. I can go along with your 10% , but not much more n/m

[OllieLotte]

33. Agreed...more would be reckless. n/t

[golfguru]

30. How is dollar losing value when I just bought a condo

for $40k less than a couple of years ago? That was 20% discount!
And any one can find bargains galore in clothing, shoes, electronics,
furniture, car maintenance, music stuff, etc etc etc.

Only thing really going up is food and gasoline. That is because
the most populous countries of the world are becoming more prosperous.

[Yavin4]

32. Okay, Here's How

You bought a condo in a market of deflating home prices. That condo you just bought 40% down from a year ago, may be down another 40% next year. Prices for homes, as well as labor prices (wages) are in a free fall decline because of the economy and a total lack of fiscal stimulus to put people back to work.

That's one side of the picture. The other side of the picture is that the Fed has been monetizing the debt so that the debt is repaid with inflated dollars. This has lead to inflation of commodities like food and energy.


The reason why you have not seen inflation of things like furniture, shoes, electronics, etc. is:

(1) Most of these items are made in China where they peg their currency below the dollar in order to help their exporters, but that may be changing as China looks to build up their domestic economy instead of exporting to the world. Also, the Chinese are unhappy with the dollar, and they're buying gold.

(2) Because labor and home prices are in decline, the overall inflation effect felt domestically is rather tame. In essence, the govt and the Fed are using high rates of unemployment to inflate the currency abroad without feeling the effects at home.

In the end, the dollar is losing its value. The spikes in gold prices are highest in after hours trading.

[Art_from_Ark]

48. Oh for crying out loud

Housing, tulip bulbs, internet stocks, sugar, silk worms are all things that can easily be produced in theoretically unlimited amounts, and have never been used as a monetary medium except for perhaps a very limited area for some items, especially where hard money was scarce or not available. Gold is a metallic element that exists in limited amounts in nature and has been a monetary medium for millennia.

How would printing more dollars in an inflationary bubble lead to a new depression? Depressions are periods of deflation-- not enough money to go around. And inflation is not the right cure-- who said it was?

[golfguru]

64. Printing excess money has historical examples

of economies crashing. For example Weimar, Argentina, Zimbabwe, etc. OTOH there are no examples of countries prospering with excessive printing of money along with excessive debt.

So, yes, excessive money supply distorts the economy, and leads to implosion. If you order a meal in Zimbabwe, pay when you order. If you wait till finishing the meal and getting the check, it will be much higher.

If you experienced the high inflation period of late 1970's, you would remember it was getting increasingly harder for consumers to purchase auto's or houses. That ended in a severe recession, and collapse of interest rates, not inflation.

[Yavin4]

34. BTW, Gold Is Back Up to $1900 per Oz

Based on the horrible day in Europe

[golfguru]

35. My target is for gold to top out at $2300 in 12 months.

But then again bubbles are impossible to predict how high they can go.
The only thing 100% certain is that the gold bubble will be pricked and
the price will fall to between 40% & 60% of high.

[Yavin4]

37. So, What Will Be The Catalyst for the "Gold Bubble" Popping?

What will make the dollar and the Euro appreciate against gold? What will make people around the world abandon gold and silver for the dollar and the euro?

For the Tech bubble, most smart people knew that there was no real business plans behind some of the startups. For the housing bubble, people knew that they would not be able to pay back the mortgages when the balloon payments kicked in.

So, I ask you: what will be the reason for the dollar appreciating against gold?

[golfguru]

39. The catalyst will be...

economy picks up, corporations make money, stocks ascend faster than gold and most will pay dividends, while gold pays zero dividend (not gold stocks) and its ascent looking increasingly weak. That will shift money out of gold into stocks, and gold will crash.

[Yavin4]

41. So, What Will Make The Economy Pick Up?

What's going to drive growth so that "stocks ascend faster"? What will make the economy grow so strong that debt can be repaid?

[girl gone mad]

55. I notice that you never got an answer.

There is no driver for growth in the economy. Even Obama's $400B stimulus plan amounts to very little. On the other hand, moves to reduce the deficit could at some point suppress gold's rise against the dollar.

[golfguru]

67. The answer is always the same

>>> Business cycles <<< !!

Although like a snow storm or sex, one never
knows how long each cycle will last.

[Po_d Mainiac]

45. u need a road trip....outa CONnecticut

where u don't always chase little white balls in the tall grass

[Po_d Mainiac]

40. The SNB just fired up their presses

That should crush Au :sarcasm:

[Yavin4]

42. It's A WorldWide Currency Devaluation Race to the Bottom

And that's why gold is soaring in price.

[Po_d Mainiac]

43. Ayuh...That's why the red drippy :sarcasm: thingy

DU posters have been calling PM's a bubble since (seems like forever) late 07 when Au/Ag were $800/$15. Self has been bullish since 03.

You either understand PM's are "money good" and are truly a world currency (and hedge against fiat depreciation), or you just don't get it. IMHO those that don't get it must think the world ends at the E/W edges of the North American continental plates.

There is also considerable confusion between bullion and the over priced coins Douche Beck is hawking.

Anyone calling a top is clueless...(not saying there won't be some dips caused by gaming the paper trades and ETF's) As long as the chairsatan and his fellow central banksters keep printing, PM's will likely be the only way to cover your ass.
YMMV

[Yavin4]

44. Totally Agree

I have no idea when gold will peak, but I do know that we won't have the kind of economic growth that can pay off our debts and revitalize the housing markets for years to come. Maybe decades to come.

In the meantime, central bankers around the world are racing to devalue their currencies in order to escape their debt burdens. Hell, even the Swiss are doing it.

[golfguru]

65. Gold will never "peak" in the long run

100 years from now, gold could be at $100,000/oz
What I am talking about gold bubble bursting, I am talking about reduction in price of 40 to 60% within a much shorter time, from 0 to 24 months.

[Art_from_Ark]

51. You are really going out on a limb, there

"The only thing 100% certain is that the gold bubble will be pricked and
the price will fall to between 40% & 60% of high"

"100% certain", my ass.
That is a ridiculous statement that is based on little more than fanciful conjecture that somehow gold is going to repeat its performance of the 1980s, even though the situation in today's gold market is markedly different from the situation that existed in the 1980s.

[golfguru]

52. If the gold bubble never gets busted

it will be the first time in human history. And when any chart looks
parabolic, it is a bubble. However like I said, bubbles can go on much more
longer than rational or logical, but 100% of the time they go bust without any warning.

[Art_from_Ark]

53. You are putting too much confidence in charts

It's like you are expecting them to be self-fulfilling prophesies or something.

Really, rather than expecting the world to care a fig about charts, you should educate yourself about gold and the gold market. For example, read about the differences between today and 1980, rather than just expecting history to give a repeat performance of the 1980s.

[golfguru]

54. OK, pont well taken, but answer this simple question...

If gold is such an outstanding investment at this inflated price,
why are 27 gold peddlers bombarding me 24-7 on TV, radio, newspapers, magazines, with offers to buy their gold? Why do they want to trade their precious gold with my horrible US dollars?

[Art_from_Ark]

59. I think I explained this in another thread

These hucksters sell their gold for grossly inflated prices to the unwary. Then they turn around and buy more gold at market prices, which they sell to the unwary at inflated prices again. Lather, rinse, repeat.

I am certainly no supporter of such tactics, and feel that they inflict damage not only on unwary investors, but also on my main hobby, which is numismatics. I encourage everyone who has an interest in gold to at least read mainstream coin publications for a more balanced look at precious metals and their role in times of economic uncertainty.

On edit: Never, never, NEVER buy gold from TV commercials!

[OllieLotte]

66. I think a better play now, if gold is of interest is to buy gold stocks.

I have owned a gold fund for quite some time and have noticed that the fund hasn't done all that well since the first of the year. I'm been keeping an eye on this for a number of months and have found out that a number of people are of the opinion that gold stocks have room to run. The justification for the stocks not keeping up with the advance of gold is that stocks as a group haven't done well and a number of people are suspicious of the high price for gold, so they expect that a gold stock won't be able to keep the higher margins. As people adjust to the higher price of gold, the gold stocks should rise. Of course, if gold falls in price, gold stocks will get pounded. This isn't investment advice. This is an example of what I have been hearing:

https://guidance.fidelity.com/viewpoints/gold-whats-next

[golfguru]

68. That is a great clue if gold stocks are just treading water

what that tells me is that gold is being touted non-stop on TV ads, radio ads, and even in print.
Notice not many ads for gold stocks. As usual, the general public is always the last one to jump on an ascending investment. The pro's are the first one's to cash in.

[Art_from_Ark]

69. There are huge differences between physical gold and "gold stocks"

If we're talking strictly bullion gold, then a one-ounce coin of .999 fine gold produced by the US Mint is as fungible as one produced by the Canadian, Australian or Austrian mints (although popularity of the designs varies from place to place around the world).

"Gold" stocks, on the other hand, are anything but fungible. People talk about gold stocks like one is just like another, but that is not the case at all. Some companies are doing well, while others are struggling. Furthermore, not too many mining companies specialize strictly in gold, so their other (usually base metal) operations, among other things, can have a negative effect on their gold operations. Also, a small listed company might find a promising gold deposit, but not have the resources to develop it, so it sells its interest to a larger company, and its stock plummets as a result, while the purchase of the deposit by the larger company might have little lasting effect on the larger company's stock price. And if a mining company has lousy management, or if it's cooking its books, its stock price can fall. Of course, mining companies can also issue more shares at any time, thus diluting the value of existing shares.

Moreover, mining stocks can be at odds with the physical market. For example, if one company makes a big gold discovery and brings it to market (several years later), the shareholders might demand that as much of that gold as possible be sold. But selling too much of it at one time might have a negative effect on the market price of physical gold. And if gold mining companies drastically reduced their output, it would put more upward pressure on the price of existing physical gold.

[OllieLotte]

47. You are right. Gold has been very resilient.

Looks like it's going to continue in Jubak's opinion due to the Swiss Franc decision to peg to the Euro.

http://jubakam.com/2011/09/swiss-peg-of-the-franc-to-the-euro-is-a-positive-although-you-cant-see-if-today-for-gold/#comments

[Art_from_Ark]

49. The gold bull market didn't begin as a result of 911

It began in large part because of the Euro agreements which limited gold market manipulation by European central banks that took effect in 2002. It has been subsequently spurred by, among other things, print-till-you-drop monetary policies, the declining influence of the United States and its dollar, distrust of local currencies around the world, and the emergence of new wealthy players such as China and India that view gold as a monetary medium rather than just another commodity.

[westerebus]

56. How you doing?

I hear very little about Japan and Fushima these days. Hope you're good.

[Art_from_Ark]

57. Hello, Westerebus

I've been meaning to start a thread about the situation in my little part of Japan 6 months after the disasters. I'm cautiously optimistic right now that things are finally starting to turn for the better, although there are still some serious problems that remain. :hi:

[westerebus]

61. Good to hear!

Stay safe. I'll look out for the thread.

I'd like to say I'm optimistic about things here too.

We may very well do our own version of a melt down. Metaphorically speaking. :hi:

[zippytheplatypus]

60. how can the constant be a bubble?

Gold is the constant, THE hard money, everything else is what changes.. sure gold value in a vacuum can change based on available supply, futures, new mining etc and especially now the price can be manipulated without any rules for anything but generally its the values of everything that change, not the intrinsic value of gold. Look at the gold price v new car prices for a century. Every year you could buy a decent car for 16-18 one oz coins. Tell me that's a coincidence..

Whenever the gold price tops no one is going to even notice because the only way it could happen is for stocks (and currency) to beat it and in order for that to happen everything has to turn around. The gold price could also take a huge dive if the banks & a bunch of other stuff actually does default 7 out removing the crazy debt we start the whole thing over with clean balance sheets. That's the apocalypse of course & if it happens gold will have to be revalued against the new currency so it will take a huge hit too but would be part of the currency backing with benefits hopefully.

The problem isn't a bubble or calling the top. The worries are taxes & confiscation a la 1933. If it sniffs a big number like 3500 or whatever it WILL happen. And paper & futures won't be worth a lot. Plus where are the silver guys here? Hello, 40:1?? It's way cheaper, easier to take delivery & just by buying it on COMEX you get to kick Jamie Dimon right in the jewels.. Silver is where its at for real all day everyday.

[Art_from_Ark]

62. Huge differences between today and 1933

1933 (before March 4)-- The US was still on the domestic gold standard. The value of the circulating currency was directly tied to the value of gold.
In 1933, the US was in the grips of a major depression. Once the announcement was made which effectively demonetized gold coins, most people who held gold coins had no choice but to turn them in for monetary instruments that they could spend, even though they were allowed to keep $100 face value if they wanted to.

Today-- All ties to the gold standard that existed between 1933 and 1971 have been dissolved. All legal restrictions on gold ownership were abolished in 1974. The amount of gold in the United States is minor compared to the amount of paper and electronic money in existence. The US Mint has been vigorously promoting its gold bullion and commemorative coin programs since the early 1980s. The US even allows some of its gold coins to be included in IRAs. There are also major organizations (such as the ICTA) that will fight tooth and nail against any hint of gold confiscation. So no, the odds are that gold confiscation WON'T happen.

As for silver, it is a different market with different factors affecting its price. It may be cheaper, but it also occupies far more space and has far more weight than gold of the same value. On world markets, it is not looked upon as a monetary asset the way gold is. There are few central banks that have shown any interest in silver, while many CBs have been net buyers of gold.

[zippytheplatypus]

63. very true but silver is most definitely money imo

Kennedy was going to issue silver certificates, not gold & the only hard currency China has ever had was silver coins. At least as much monetary history as gold, probably more. I've glanced over a few stories recently about coining copper, that's just silly at this point but silver is both a usable commodity and currency, I will always hold the pov that especially in confidence crises the monetary nature takes precedence. They're coining it right now & have substantial silver coin & boullion reserves as far as I know. Why else would JPM short it so badly?

40 years into a fiat run gold would be hard to confiscate but paper gold & futures would be very easy to tax & delivery will become near impossible, especially international holdings. The feds are demanding Swiss banks open up to try to collect back taxes from US corporations right now, when did you think you'd ever see that? They don't have a chance in hell of doing it or ever seeing a dime but they're getting aggressive or at least pretending to. These guys will screw the average Joe any way they can, that's been established. I read Ireland is putting out a trial balloon for generational debt, I have no doubt they'll try that here too with recourse paper & student loans so who says they couldn't tax paper gold at 90% for the 99ers?

[Art_from_Ark]

70. You make some good points

Kennedy, in fact, appointed a commission that for a while made it impossible for average citizens to buy foreign gold coins *dated* 1961 and later. That's one reason for the large amount of Mexican gold coins dated 1945, 1955 and 1959, and probably a reason for the proliferation of restrikes of French "Rooster" gold coins, and Spanish 10 & 20 pesetas (dated 1878, but with a tiny symbol denoting that they were actually struck in 1961 or 1962!).

Speaking of French "Roosters", if you see them advertised on TV as being "100 years old but still in great condition!", take it with a HUGE grain of salt! Those Roosters might be dated 1908 or so, but they were likely struck in the '60s or later, and they wouldn't have circulated so they should all be in "great condition", since gold does not corrode or tarnish.