After that,a not-so-orderly decline. To a price where the buyers of today feel disgust at best. I'm going to illustrate my point on another level here. Outside of the inflation/deflation argument for just a minute.
What if gold is a bubble? What if gold has been a bubble for over 20 years, trying to unwind but held up by die-hard optimism of its followers. And now that optimism seems to have spread around to hedge funds, central banks, et al.
That's the point where you want to start getting a little fearful. Remember Warren Buffet's old saying - "Be greedy when others are fearful, and be fearful when others are greedy". Well, as illustrated in yesterday's ETF inflows chart, I'm seeing a hell of a lot of greed.
And don't for a minute think that this is a one-of-a-kind "investment attraction" scenario for gold. That this is the only time in our lifetimes that we have seen this kind of attention.
What about the 1980's? If you price out the high of gold in today's dollars you end up with about $2100!! That is TWICE the amount of money suckers are paying right now. What's even crazy there is actually MORE speculative money/credit still floating around out there and yet the price of gold isn't CLOSE to its all-time high.
But, like I said before, what if gold is still unwinding a bubble? What if we are actually seeing a long-long-term sentiment-based series of events playing out before our eyes under the clever ruse of an inflation-deflation scenario.
Like I said yesterday, I believe in gold 100% philosophically. I believe it keeps people free and governments chained up, as they most certainly should be.
But I also have started thinking something else recently. Allow me to explain. (An ode to sweet visual aids, anyone?)
When it's over, the market takes those gains away in a real hurry.
As you can see.
Looks kind of familiar, doesn't it?
Maybe something like this as well...
Or This. I have a personal price target of $25.00 for oil within the next 24 months. I know, I know - hate mail here we come.
And of course This
And who in their right mind could possible forget This. The driving factor behind some of "those" and many others not shown here...
Anyway, back to my main point. After much ado.
Gold is in a mini-bubble of its own. A sentiment bubble. A psychological bubble. Ask any guy or gal on the street if gold is going up or down, and what do they say?
I know what they say, because I have been saying it for years. Except, now that everyone seems to be listening, I have a feeling it might be time for a change of tune. For now. And telling you that I think gold could see the unimaginably low price of $350 is the type of melody change I'm talking about here.
Call me crazy again in 2 years. That's probably about the time people WILL be because I'm buying the stuff.
And that, dear readers, is just the point.
Happy Long Weekend, all!
Derek.
Posts
What complete drivel. First off the price of gold his highly manipulated by central bankers in an effort to ward off the clarity of their mistakes and to keep the populace chained to their fiat currency. Gold is a wealth preservation tool not an investment that is till or when the dollar collapses that is. Chart lovers are funny check the facts you cant get those from charts
ReplyDeleteWhat complete drivel. First off the price of gold his highly manipulated by central bankers in an effort to ward off the clarity of their mistakes and to keep the populace chained to their fiat currency. Gold is a wealth preservation tool not an investment that is till or when the dollar collapses that is. Chart lovers are funny check the facts you cant get those from charts
ReplyDeletelol nice to see the warm responses I was expecting.
ReplyDeleteAs I said, I believe in gold philosophically for all the reasons you have stated and then some.
But the fact of the matter is that Gold historically does NOT prosper during deflationary depressions (Treasuries have actually outperformed gold by over 1.5% / annum during depressions). Whatever the news people tell you we are not in an inflationary scenario yet, and this will become more evident and banks are forced to write down their bad assets and the home foreclosures (over 1 million) put on hold by government regulation are actually pushed through. Inflation is still several years away (once the malinvestment has actually been written down and liquidated).
You may laugh at the chart analysis, but in the end the market is all about PRICE. Price is the collective perception of value by all market participants.
Fundamentals do matter but only in times when they matter, you know? People argue all of the time that fundamentals drive price, but what actually drives price is PERCEPTION of fundamentals and overall sentiment. Your same argument could have been brought up in 2004 about rotten fundamentals, and yet the market rallied (hugely, I might add) for 3 years after!
You are arguing about checking facts which will skyrocket prices of gold. Where were those facts last fall when gold went down to $700? Nowhere to be found in the market, as perception and sentiment was what drove the price down.
I'm not saying gold will be down forever. I'm not even saying it will be down in terms of years. I am saying it will be down, and I am saying that because everyone is saying that it will be up.
When people HATE gold because dollars actually would have paid them more, good sir, that is the point I will be taking my Federal Reserve notes and changing them in for the good stuff...
Cheers!
Mini bubble in gold? How about a bond treasury bubble? Debt bubble? Did you know that you can have an inflationary depression? You need to study money a bit more. Seems you don't understand inflation/depression and why they occur. They are both monetary events not push pull events.
ReplyDeleteGold $1200 - $1600 by December 09, then we start the major move as we get to $5000 +, maybe as high as $10k during the mania. There are a lot of USD around and few customers left as the Gov is buying their own debt. Think Germany 1913. The Dow will go higher during inflation, but after factoring in the inflation it may only be treading water at best.
Good luck Son.