The gold bubble

[Neubarth]

Maybe gold isn't in a bubble. Maybe it's dramatically undervalued and should be priced at $6300!

SocGen On Gold Mania, And Why Gold Is Very, Very Cheap | zero hedge

As I have told people for the past quarter of a century, Gold is worth what people will pay for it. It has value as jewelry. It will never be used as money in the modern world as there is not enough of it to guarantee the currency of any of the major players in the world arena.

As in the past, I have postulated, "If a currency is truly backed by Gold reserves then that currency is exchangeable for those reserves. If so, all of the gold could be taken in exchange for that paper money if a panic starts. In that case, would the paper money have value?" Gold backing of currency is simply not viable. Backing a currency by the industrial might and productivity of a country is.

 

[Toro]

I sold all my gold today. I don't think that gold has topped and think there is more upside to come. However, when we sell down hard like we did today, that usually portends either a sideways move or a correction. Usually, markets do not continue rising after it gets hammered.

I will look to re-enter gold at a future date.

Unless it really starts rolling over, then I'll short it.

 

[Toro]

I was wrong. Gold wants to go higher so I bought it back yesterday.

It's a melt-up. At some point, gold is going to fall hard, but that day has not come yet.

 

[editec]

With gold at record prices, nearing $1200/ounce, one must be careful and realize that sometime, probably in the first quarter of next year, the Fed will raise interest rates and pop the gold bubble as gold will most likely fall to under $900/ounce. Remember, gold is a commodity. Like all other other commodities, whenever it hits a meteoric rise, it will always, ALWAYS have a meteoric drop within six months time. Just remember the oil bubble of 2008 as the perfect example of that.

I hope everyone here is careful with their gold purchases.

Good advise.

People holding AU at the top of the market in the late 70's leaned that lesson BIGTIME.

I thik it took nearly 20 years for the price of AU to recover from the fall it took that time.

Stocks can be the same way.

If you were invested in Oct 1929, your stocks didn't again break even until the mid 1950s!

Wonderful time to be a investor with dough if you have nerves of steel or a crystal ball.

Otherwise?

Batten down the hatches and prepare for heavy swells, maties.

 

[editec]

Rogers is the Buffett of commodities. Certainly not one to bet against.

That's good due diligence on the gold though Toro, I can't wait to see some of the others in here come in and say Gold's way overinflated because TV commercials have been pimping it

Some people HATE gold, it's weird. Why wouldn't you take gold into consideration with this particular monetary policy we've gone with?

Makes no sense from an investor standpoint.

I only invest in pork bellies, because you can't eat gold.

I haven't seen a pork belly commercial though so obviously no one's buying any.

Bacon.

 

[editec]

Perhaps rather than price gold in dollars, we should price gold in loaves of bread?

How many loaves of bread can you buy with one ounce of gold? I don't believe, in a given economy, that the number of loaves will dramatically vary, regardless of the country's monetary policy. You won't see more than a tenfold change in value in either direction over any short-term period of time.

This is in contrast with fiat currency...few people go into gold looking to turn a profit.

I used to use the loaf of bread unit of measure, too.

Now, I'm informed that some economists use the CALORIE unit of measure.

For example, in the early industrial revolutionary period in England, the average worker's day wages could purchase about 5000 calories of food.

Of course there is no one single unit of measure that works all the time because comodities change their relative values depending on events like technology advances, weather and so forth.

 

[Neubarth]

I was wrong. Gold wants to go higher so I bought it back yesterday.

It's a melt-up. At some point, gold is going to fall hard, but that day has not come yet.

Like all bubbles, when everybody including the shoe shine boy is buying gold, THEN you will know for certain that it is the time to get out.

In a previous post that Edi posted to, it was postulated that Gold should be compared to a loaf of bread (as an example of a commodity). If so, Gold today can buy 2000 loaves of bread. Several years ago it could not even buy 700. We have a bubble that will burst when people realize that Gold is just a simple pretty yellow metal that has a lot of uses, and that there is more than enough to meet those uses right now. I think China mines about 300 tonnes a year. If so, they are making a hell of a lot of money from their mining.

I jokingly tell people about that vein of Gold in West Texas near El Paso that is fifty feet thick and two hundred feet high and extends back into a mountain on Federal Land about a mile and a half. It is covered up and guarded by the Federal Government, but if mined would allow the US government to pay off all of its debt for the next hundred years at the prevailing rate for Gold. .............

Toro for the sake of all those other people, I hope and pray that you are not the shoe shine boy. I have thought about nicknaming you The Sun Shine Boy because you always see things in a positive light. Nick Names can be fun.

 

[uscitizen]

Ahh but the real question to me is there enough gold for everyone to really invest in it?

Will gold investment scams be the next big issue?

 

[Neubarth]

Ahh but the real question to me is there enough gold for everyone to really invest in it?

Will gold investment scams be the next big issue?

Of course! Where ever the fools are congregated, there will be crooks who will take advantage of them.
Such is the reality of human nature.

 

[Zander]

I was wrong. Gold wants to go higher so I bought it back yesterday.

It's a melt-up. At some point, gold is going to fall hard, but that day has not come yet.

You bought at around $1209.00. Today it is at $1150.00 Why did you second guess yourself?

 

[Paulie]

I was wrong. Gold wants to go higher so I bought it back yesterday.

It's a melt-up. At some point, gold is going to fall hard, but that day has not come yet.

You bought at around $1209.00. Today it is at $1150.00 Why did you second guess yourself?

Unless there was a previous time when Toro liquidated all of his gold that I'm not aware of, he didn't "buy at around $1209".

Toro's held gold since early in this decade.

 

[JW Frogen]

The Chinese have been buying gold to add to their reserves as a counter balance to all the US debt they hold at record rates (they are starting to get worried that the US is spending money at a rate that will depreciate the value of the US debt they hold) but they are now worried they might have created an unstainable price, so I would not be suprised if they ease off and let the price level a bit.

Still, it is all about supply and demand and Australia has shit loads of the stuff sitting in the ground waiting for the colour to be brought to life.

 

[Zander]

I was wrong. Gold wants to go higher so I bought it back yesterday.

It's a melt-up. At some point, gold is going to fall hard, but that day has not come yet.

You bought at around $1209.00. Today it is at $1150.00 Why did you second guess yourself?

Unless there was a previous time when Toro liquidated all of his gold that I'm not aware of, he didn't "buy at around $1209".

Toro's held gold since early in this decade.

Read the thread -Toro stated that he sold all of his gold

11-27-2009 07:07 AM
I sold all my gold today. I don't think that gold has topped and think there is more upside to come. However, when we sell down hard like we did today, that usually portends either a sideways move or a correction. Usually, markets do not continue rising after it gets hammered.

I will look to re-enter gold at a future date.

Unless it really starts rolling over, then I'll short it.

Then he said he bought back in on December 2nd.

12-02-2009 04:10 AM
I was wrong. Gold wants to go higher so I bought it back yesterday.

It's a melt-up. At some point, gold is going to fall hard, but that day has not come yet.

The price on that day was $1209.00

 

[Paulie]

You bought at around $1209.00. Today it is at $1150.00 Why did you second guess yourself?

Unless there was a previous time when Toro liquidated all of his gold that I'm not aware of, he didn't "buy at around $1209".

Toro's held gold since early in this decade.

Read the thread -Toro stated that he sold all of his gold

11-27-2009 07:07 AM
I sold all my gold today. I don't think that gold has topped and think there is more upside to come. However, when we sell down hard like we did today, that usually portends either a sideways move or a correction. Usually, markets do not continue rising after it gets hammered.

I will look to re-enter gold at a future date.

Unless it really starts rolling over, then I'll short it.

Then he said he bought back in on December 2nd.

12-02-2009 04:10 AM
I was wrong. Gold wants to go higher so I bought it back yesterday.

It's a melt-up. At some point, gold is going to fall hard, but that day has not come yet.

The price on that day was $1209.00

Yeah, but he's been in I believe since the $200's. So he made a nice profit when he sold. There's nothing wrong with jumping BACK in at $1200 if you see a technical indicator that it's going to go up.

Toro's not a gold bug, but he probably buys more gold than any non-gold bug I've ever come across.

My point was that you questioned him on a move that you considered to be fruitless, where I don't think you have the whole back-story, that's all.

 

[Toro]

I was wrong. Gold wants to go higher so I bought it back yesterday.

It's a melt-up. At some point, gold is going to fall hard, but that day has not come yet.

You bought at around $1209.00. Today it is at $1150.00 Why did you second guess yourself?

When you trade parabolic moves, you have to sell first and ask questions later. When a stock or a commodity is going parabolic – as gold has been of late – often times, the end of a big move is signaled by big down day. On Friday, when Dubai World defaulted, gold traded below $1140 and fell 4.6% intraday. That is a big down day, so I sold my position at ~$1155

However, when the asset recovers intra-day and moves higher, that is usually a signal that the parabolic move is not over. So I bought my position back at $1195 using calls at a higher strike that my original position with the proceeds from the profits I made on my closed trade. Thus, if I was completely wrong, I would not have risked my original capital. I was playing with house money.

Today was another big down day, with gold down 5.7%. One difference today compared to last Friday was that volume was huge. This is worrisome. Another big, big difference is that there was no intra-day reversal as there was over the Thanksgiving holiday. Intra-day reversals on down days occur because buyers see the sell-off as a buying opportunity. This signals buying power. When a commodity or stock falls hard and continues falling into the close, that is usually a bad sign because it means buying power is exhausted and people want to sell.

So I blew out my position at ~$1155 and gave back a third of the profits I made from my original position. We bounced a little at the close, but we ended the session near the day’s lows, which is usually a sign of more selling to come.

I don’t think this is the end of the gold bull market. I think that we are going to get to $1500- $2000 eventually. But I might be dead wrong. This may be the top in gold. Large declines on huge volume after a parabolic run, especially after a recent big down day, is not a good sign.

If you study past parabolic moves, there is usually a correction and a period of consolidation. This may such a period. If it behaves in a similar manner, I expect a period of backing and filling for 2 to 6 weeks and then another move higher. I would buy then. However, when you trade, you have to be intellectually flexible. If we run immediately back up on light volume, then begin to roll over, that might signal the top and a shorting opportunity.

 

[Toro]

I was wrong. Gold wants to go higher so I bought it back yesterday.

It's a melt-up. At some point, gold is going to fall hard, but that day has not come yet.

You bought at around $1209.00. Today it is at $1150.00 Why did you second guess yourself?

Unless there was a previous time when Toro liquidated all of his gold that I'm not aware of, he didn't "buy at around $1209".

Toro's held gold since early in this decade.

I sold my position last Friday, bought it back Tuesday then blew it out again today. I've made my broker happy!

I've owned gold off and on during the decade. I first bought in early 2002 at just above $300, but there have been times I've been out of gold. I'm hoping to buy it back at least once more though!

 

[Zander]

Unless there was a previous time when Toro liquidated all of his gold that I'm not aware of, he didn't "buy at around $1209".

Toro's held gold since early in this decade.

Read the thread -Toro stated that he sold all of his gold



Then he said he bought back in on December 2nd.

12-02-2009 04:10 AM
I was wrong. Gold wants to go higher so I bought it back yesterday.

It's a melt-up. At some point, gold is going to fall hard, but that day has not come yet.

The price on that day was $1209.00

Yeah, but he's been in I believe since the $200's. So he made a nice profit when he sold. There's nothing wrong with jumping BACK in at $1200 if you see a technical indicator that it's going to go up.

Toro's not a gold bug, but he probably buys more gold than any non-gold bug I've ever come across.

My point was that you questioned him on a move that you considered to be fruitless, where I don't think you have the whole back-story, that's all.

I was just wondering why he reversed himself...but he explained himself quite thoroughly!

Personally, I don't trade much. I adjust my asset allocation based upon safety. I don't need to take much risk, so I don't. Right now I am thinking cash is the place to be . I expect commodities, stocks, real estate, all to drop in the short term. That is why I am in 100% cash.

I may buy some deep out of the money S&P 500 PUT options next week, just for fun. If I am right I could make a boatload of money with very little risk......

..

 

[Toro]

I may buy some deep out of the money S&P 500 PUT options next week, just for fun. If I am right I could make a boatload of money with very little risk......

..

That might be a good trade, even if it is just for insurance purposes.

 

[Neubarth]

You bought at around $1209.00. Today it is at $1150.00 Why did you second guess yourself?

Unless there was a previous time when Toro liquidated all of his gold that I'm not aware of, he didn't "buy at around $1209".

Toro's held gold since early in this decade.

I sold my position last Friday, bought it back Tuesday then blew it out again today. I've made my broker happy!

I've owned gold off and on during the decade. I first bought in early 2002 at just above $300, but there have been times I've been out of gold. I'm hoping to buy it back at least once more though!

A gold bug and his cash are soon parted, seldom to be restored whole again. That said, I expect in the long run, the value of Gold will exceed $2000 within two years.

Everybody thinks we are going to have some bodacious inflation down the road and with that inflation the value of gold will rise.

Right now, except for the ill effects of the price of oil, we are seeing little or no inflation. That will stop when we stop holding the overnight interest rate below one percent. Of course, if the economy continues to tank as I have demonstrated, we might hold the interest rate below one percent for some time in an effort to make all the Big Bankers disgustingly rich. Banks can drum up a lot of support for politicians come election time, so it never hurts a politician to help the bankers leading up to election time.

 

[smithfix]

Gold is a hedge against inflation not an investment. I treat gold as a saving account. IF 'the sh-t hits the fan' I have silver coin to use as a means of exchange in the short term.
Can anyone give me an explanation of how we are NOT going to have Hyper Inflation? The actions of our government have made it impossible to save the Dollar, IMO.
I may not have the higher education of many of you, I am just a Texas wood butcher (Carpenter), but I have looked at the consequences of monitay policy gone wild, as we have now in Washington and can find no instance where it worked.
I am 100% liquid in tangible assets (not cash, as in Federal Reserve Notes).
Perhaps I am too simple, but I just can not afford to lose 90% of my life savings to inflation.