Thursday, January 27, 2011

Gold Bubble Update



Source Data:
USGS: Historical Mineral Prices
Kitco: Gold
BLS: CPI

13 comments:

getyourselfconnected said...

Sign of a silver top? Silver Ion deodorant by Degree! I bought some. They need to advertise on ZH and Kitco!

Stagflationary Mark said...

GYSC,

Hahaha! You might be onto something!

I use Right Guard. It makes sense if you think about it. I tend to be defensive with my investments.

My girlfriend has been known to use Secret. I wonder what she's keeping from me! ;)

Mr Slippery said...

I use Arrid Extra Dry, but it only keeps me regular dry.

Re: gold bubble. My understanding of what killed the gold mania in 1980 was a reversal of government and central policies. Interest rates were raised to 20% compared to 3% today (and 0% short term).

I believe a similar rise in rates today would create the same reaction, but I don't believe the Fed has the latitude to do that.

The large correction gold is going through right now was long overdue, but I think it is only temporary. I would be surprised to see it drop below 1280 (+-20) without a panic sell of in stocks. In fact, I plan to add to my stocks at that price.

I could go into my story for gold (every bubble needs a good story), but Mark has heard all of it before.

Of course, I could be completely wrong and it will all be documented for posterity right here with all the other illusions of prosperity.

getyourselfconnected said...

" but I don't believe the Fed has the latitude to do that."
Really, no kidding? Great observation.

Sorry for that, just stating the obvious.

My targets remain, though chart wise a huge bounce here is ready to go:
Gold: $1250
Silver $22.50

Will be buying if it happens.

Stagflationary Mark said...

Mr Slippery (& GYSC),

"My understanding of what killed the gold mania in 1980 was a reversal of government and central policies. Interest rates were raised to 20% compared to 3% today (and 0% short term)."

I believe that multiple reasons existed.

1. Gold had become extremely overpriced relative to toilet paper.
2. Real long-term interest rates turned positive. (Inflation was very high but interest rates were higher.)

Those same conditions apply today.

1. Toilet paper prices have been rising VERY slowly over the last decade. Gold prices skyrocketed.
2. Real long-term interest rates are more than 2% now on 30-Year TIPS. They've risen considerably off the bottom.

With inflation this low (just 1.5%), it should not take anywhere near 20% to pop the bubble.

For what it is worth, here are a few rebuttals I did on the GLD message board. See here, here, and here.

Just opinions of course.

Stagflationary Mark said...

Mr Slippery,

"Of course, I could be completely wrong and it will all be documented for posterity right here with all the other illusions of prosperity."

I know exactly what you mean. There is a nontrivial risk that I am completely wrong, my opinions will financially ruin me, and the Illusion of Prosperity will serve as a warning to others in the distant future. I truly believe that. It is the risk we take using social media.

That said, at least we've got this going for us, lol. :)

Mr Slippery said...

That Despair picture is awesome.

I added to my physical bubble stack this morning. If I run off a cliff, I will be running at full speed :)

GawainsGhost said...

I use Aramis, deordorant and cologne. Yeah, it's expensive, but I always get compliments from women. They like the way I smell. You get what you pay for.

Besides, Aramis was the ladies' man of the Three (or Four) Muskateers.

Is there any greater bubble than gold? I don't know. Oil, maybe. Probably commodities.

I think the best investment to make at this time is in arrable farm land. Just don't plan to grow corn. Ha!

Deflation is a bitch.

Stagflationary Mark said...

GawainsGhost,

It is funny that you should mention farm land. I'm working on a chart of Montana farm land right now. It peaked in 2008 at $900 per acre. It now stands at $700 per acre. That's still double what it was in 2001 though.

AllanF said...

That despair link was hilarious!

Charles Kiting said...

I use Hi Karate.

Don't take investment advice from me.

Stagflationary Mark said...

AllanF,

Everything about despair is funny! Um, I mean the website. Well, um, you know. ;)

Stagflationary Mark said...

Charles Kiting,

Hi Karate is dangerous! Hahaha!