Gold

[denpal]

'Should an investor jump out here?'

Up to you EZ.

From 1994 to 2000 the NASDAQ went up 6 times until it's historic, $5 trillion crash.

From 2002 to 2011, gold has gone up 6 times, exactly the same amount.

You're suggesting gold is only about a third of the way up, that would make it the most vertical, overpriced, unsustainable chart in the history of the world.

A crash from such absurd heights would wreak havoc, impoverish billions, and set off something much worse than the GFC.

You can be sure that something will prick the bubble well before then, if it hasn't been pricked already.

I notice the 'mainstream media' as the goldbug jargon goes have been very careful about this lest they shoulder the blame for setting off a general panic.

One thing that never changes and never will is bubble psychology. I have vivid memories in 2000 of seeing the dot-com fanatics swearing black and blue it was different this time, a new era, new paradigm.

Hahaha, yeah right.

It never is, no matter what denpal or anyone else says.

I'm not saying anything, I'm just investing in a great trend. If and when it ends I'll step off, hopefully within 30% of the top.

[Hoop]

A posted a bubble chart from sharelynx.com back in early May but I can't find it....anyway... below is the update. I don't know the exact date they used for this chart whether it was before or after this recent correction/peak but the previous bubble chart I posted somewhere had Gold at 492% and silver at 770%...so the bubble has inflated.
The tulip bubble is mentioned at 5900% along side the good company of the 2008GFC victims

Note that the vertical scale is log

[elZorro]

Birmanboy:

Why do you believe Gold has got to the price it has today ?
Speculators and people looking for a hedge against currency meltdowns and erosion of their capital base. You can understand this when the interest rates in the US are virtually zero % and stock investors have suffered losses and seen the value of the USD eroding. Practically there is no reasonable reason for the rise since the use of gold in jewellery and dowrie dough for third worlders is evidently not the underlying reason. Even more buying of jewellery by the growing wealthy Chinese cant account for price rise.

Mostly good points you made, but don't forget the strong link between gold and the price of energy (oil). If a fraction of the profits from oil sales get stored as gold bars (anyone have the figures?) would that be a major reason also?

Hoop, thanks for the chart, I rest my case. Land appears to be one of the quickest correcting bubbles, at two hundred percent or less. Gold could reach a 2,000% increase, and is currently at about 600%. For most of that leadup, it has been a steady increase over many years. Internet stocks have been amongst the worst. Even oil reached 1255%.

But if gold really is linked to oil and a safe haven, then Skol's other favourite subject (about how we will have no shortage of oil), becomes more than academic.

[BIRMANBOY]

El Zorro you say
"but don't forget the strong link between gold and the price of energy (oil). If a fraction of the profits from oil sales get stored as gold bars (anyone have the figures?) would that be a major reason also?

I dont know about forgetting it!! I wasnt aware of it!! It sounds like something a few lucky people perhaps might think about, but since i am not on the CC list for the Saudi royal family newsletter I have to rely on your "information" in that area. I would surmise that most oil barons convert their petro-billions into Swiss pharmaceutical firms and Manhatten real estate. However, lets for arguement sake take the plunge and say thats its a possibility....so what...you dont think they wontl cash up if the moment comes and they sense the price is unsustainable. The underlying problem with physical gold is if you put too much in an escape helicopter it wont fly :-)

EL Zoro says.
Mostly good points you made, but don't forget the strong link between gold and the price of energy (oil). If a fraction of the profits from oil sales get stored as gold bars (anyone have the figures?) would that be a major reason also?

Hoop, thanks for the chart, I rest my case. Land appears to be one of the quickest correcting bubbles, at two hundred percent or less. Gold could reach a 2,000% increase, and is currently at about 600%. For most of that leadup, it has been a steady increase over many years. Internet stocks have been amongst the worst. Even oil reached 1255%.

But if gold really is linked to oil and a safe haven, then Skol's other favourite subject (about how we will have no shortage of oil), becomes more than academic.[/QUOTE]

[Skol]

Birmanboy:

Mostly good points you made, but don't forget the strong link between gold and the price of energy (oil). If a fraction of the profits from oil sales get stored as gold bars (anyone have the figures?) would that be a major reason also?

Hoop, thanks for the chart, I rest my case. Land appears to be one of the quickest correcting bubbles, at two hundred percent or less. Gold could reach a 2,000% increase, and is currently at about 600%. For most of that leadup, it has been a steady increase over many years. Internet stocks have been amongst the worst. Even oil reached 1255%.

But if gold really is linked to oil and a safe haven, then Skol's other favourite subject (about how we will have no shortage of oil), becomes more than academic.

The WSJ says the historic gold/oil ratio is 15:1.

Gold is $1800 so oil should be $120.
Oil is $80 so gold should be $1200

Which one?

[elZorro]

Birmanboy, maybe we're both old enough to know that things aren't black and white, more a shade of grey. Gold isn't just a yellow metal of dubious worth, it's partly currency, and it holds its value through time (OK, a bit up and down) compared to other goods that humans might use. Here's a link to oil production, and scenarios for the years ahead.

So most pundits predict oil to become more scarce, that will increase its price. Right now, 90 million barrels a day are being consumed, at an average trade cost of US$100/barrel, let's assume 33% profit, so about $1,000,000 million dollars of profit each year to be used up somehow. This doesn't include downstream profits from everything made from oil, the retail margins, other enterprises the barons get into. Cheap oil made the USA prosperous, and that's why they're not doing so well now. That raw oil profit could buy 570 million ounces of gold per year. Annual production is only 85 million ounces per year, and there is competition for that. Compared to other options like keeping the profits in US$ or stocks, history is on the side of gold hoarding for the moment.

Here's a bit of info on the strong link between oil and gold prices. It's fairly compelling.

http://www.incrediblecharts.com/econ..._oil_ratio.php

[elZorro]

The WSJ says the historic gold/oil ratio is 15:1.

Gold is $1800 so oil should be $120.
Oil is $80 so gold should be $1200

Which one?

Guess it depends on which type of oil Skol. Anyway the ratio might have an average of 15:1, but it stays in a channel around that generally.

[BIRMANBOY]

El Zorro, sorry bud but you are confusing the issue here...If you make the assumption that somehow the 2 commodities of oil and gold are somehow linked together in some sort of symbiotic alliance why stop there...just add in the Euro, property prices in Grey Lyn and of course the US dollar and dont forget the Chinese ownership of US bonds. Jees man..its hard enough exploring one element without adding in other extraneous factors. Keep it simple. Is gold overpriced or isnt it. People make careers out of discussing reasons why but the question should be simply..What would you rather own A $2000 gold coin or $2000 worth of Telecom shares. Whats the answer? Well it depends on timing doesnt it...right now I'd rather own the shares. What you do is of course up to you. End of story. Also I should point out that gold is NOT currency...Countdown wont give you change from your Maple Leaf. You still have to sell your coin to get real currency thats usuable. And obviously if you paid 2000 for your coin and the bottom dropped out of the market you wont be a happy camper. The only thing that gold is good for is making pretty shiny baubles for those of us who want to impress others. It has several great features that have been recognised for ages which has allowed it to maintain its appeal. Its malleable so can be shaped and forged and fashioned into items of adornment. Its vrtually indestructible. It appeals to our aesthetic sense of beauty because of its rich "sunlike" appearance. It can be alloyed with other metals to make it more durable. (obviously pure gold is quite soft and scratches easily). When you take all the allure and mystique and hype away however its just another product pushed along by its own marketing campaign. There have been times in history when people shifted to hard assets like gold and diamonds because the banking system was failing, there was no local reliable banking system at all or they were denied access to banks. Now some gold Hawkers will say... precisely...thats what happening now...the sky is falling..we need to put our useless cash into these portable, vehicles to preserve our wealth..in case..in case...in case. I dont see it but I can understand how if you were living in Libya or a poor peasant in India 50 miles from the nearest bank you could be justified in being a goldbug. In a vast majority of the world it just doesnt seem warranted.

Birmanboy, maybwe're both old enough to know that things aren't black and white, more a shade of grey. Gold isn't just a yellow metal of dubious worth, it's partly currency, and it holds its value through time (OK, a bit up and down) compared to other goods that humans might use. Here's a link to oil production, and scenarios for the years ahead.

So most pundits predict oil to become more scarce, that will increase its price. Right now, 90 million barrels a day are being consumed, at an average trade cost of US$100/barrel, let's assume 33% profit, so about $1,000,000 million dollars of profit each year to be used up somehow. This dosn't include downstream profits from everything made from oil, the retail margins, other enterprises the barons get into. Cheap oil made the USA prosperous, and that's why they're not doing so well now. That raw oil profit could buy 570 million ounces of gold per year. Annual production is only xx million ounces per year. Compared to other options like keeping the profits in US$, history is on the side of gold haording for the moment.

[Skol]

Gold's only useful if you live in Iran or some other godforsaken place and want to smuggle assets out.

[elZorro]

Hi Birmanboy, well at least I know which side of the argument you're on..no doubts there.

If it's so clearcut, why did Teresa sell her Telecom shares and buy gold? Don't do it Birmanboy - keep that gold coin and resist buying standard shares for a while.

But research some good gold explorer or mining shares, look back a year or two and look at some of their gains, phenomenal. There are some very smart and well-connected people involved in mining, we just have to be smart enough to be sitting alongside them when their investment vehicle takes off.