Is gold rally a bubble? Not even close, yet
According to Dictionary.com, the definition of a speculative bubble is “a temporary market condition created through excessive buying and an unfounded run up in prices occurs.” If there is one asset that commonly gets described as being in a bubble, its gold but let’s look at its move over the past 10 yrs in perspective compared to other “bubble’s.” Gold at $1400 is up 450% from the Aug ’99 low. From 1982 to 2000, the NASDAQ rose 3000% and the DJIA rose 1400%. From 1978 to 1989, the Nikkei rose 700%. From July ’98 to the high in July ’08, crude oil rose 1245%. From its low in Nov ’01, copper has risen 605%. I’m not calling a bubble in Apple but its up by 4850% since 2003 for the obvious reasons. Thus, just because an asset is higher and has done well for years doesn’t mean its a bubble, YET, and this gold rally which I’ve been bullish on for many years, still has room to run.
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December 29th, 2010 at 4:33 pm
Agreed.
December 29th, 2010 at 4:37 pm
The only entity I hear routinely calling gold a bubble is CNBC….I especially love the “gold doesn’t pay a dividend” arguement….Well, neither does CSCO and the only beneficiary of CSCO’s mediocrity is John Chambers.
And if I hear Joe Kernan say “class warfare” one more time in response to any left leaning politician looking to balance the government books, I might throw my TV out the window.
December 29th, 2010 at 7:03 pm
I don’t know how anyone can say if gold is over or undervalued…it’s an asset with no cashflows, and (practically) no industrial use. How do you value this thing? Isn’t all gold investment necessarily based on the greater fool theory?
December 29th, 2010 at 7:23 pm
chartist:
“balance the government books”…. LMAO! The government can print all the money it wants. In this high unemployment deflationary environment, the more the better. You grew up on the gold standard, right?
hahahahaha.
December 29th, 2010 at 8:34 pm
I agree with Alekos. Only gamblers, the fearful and the un-needy would consider gold at 1,400 or higher an “investment.” For the gambler and the un-needy it’s the kick of surging momentum; for the fearful diversification or a hedge against apocalypse. There are far more useful ways to play the inflation game.
December 29th, 2010 at 8:59 pm
we will find out the real price of gold when it can’t be bought on margin.. LOL.. that said, i wonder it the gold vending machines take credit cards.. because apparently, there is a sizable number of debtors that plan to die with maxed out credit cards.
December 29th, 2010 at 9:07 pm
Gold in a bubble….? I hardly think so….. We haven’t even seen a parabolic move, much less a hyper parabolic….
It’s been a relatively orderly market. When we start to see the aforementioned activity that’s when I start to accumulate puts in large quantities… So far, so good, no fear…. Bubble…..? My mother fucking eye…!
Best regards,
Econolicious
December 29th, 2010 at 11:39 pm
Sounds like most of the discussion about the dot com and real estate bubbles and we know where that went.
That is not proof of course. Gold will be seen as a bubble when hurts a bunch of folks portfolio.
December 30th, 2010 at 6:40 am
It has caught the attention of retail investors, Cramer is talking about it. Is that not bubbly, statistics aside?
December 30th, 2010 at 9:38 am
the article’s only criterion for judging whether an asset is a bubble is how much it has gone up !?
fail
December 30th, 2010 at 5:03 pm
I think many investors buying gold think it could be in a bubble. But on a relative basis, the mother of all bubbles is the US Treasury bubble, and gold could offer some protection if Treasuries crash.