Is Gold In A Bubble?
Posted by Frugal on March 13th, 2009
One of my colleagues have repeatedly asked me this question. I am quite clearly on the answer, “NO”.
How many people do you know who actually hold GLD? How many people do you know actually buying gold? How many people do you know actually buy mining shares? The answer all too often is close to zero.
A bubble is ALWAYS easily recognizable (unlike the shameful Greenspan who claims that it can only be seen hindsight). The participation rate will be quite high that you are bound to hear about it in news REPEATEDLY, and that it will be always the “topic of the party”. A bubble is a collective ignorance or rather frenzy, and there is always a disconnect to reality.
In fact, gold is looking extremely good technically, forming the bottom of the cup in a cup & handle chart. The next rising up is usually pretty substantial.
At $1000 just a month ago, the gold bull is faithfully shaking off the Indian and Arabic participants. However, the Asian will be piling in due to competitive devaluations of their own currency. Asians have always recognized both gold/silver as the money. They will never hesitate to protect their own wealth in the real money.
So are you onboard?
Unfortunately, for the smaller investors, physical gold is pretty much out of reach. With a minimum order of 20 ounces, that is about $20000. The only current buyers are from institutions and people who have money to put away. These are smart investors buying in, while the middle class is selling out their last portion of gold jewelry for cash. Who will be right?
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March 14th, 2009 at 6:26 am
I own 1-ounce gold coins and can buy it easily in any amount.. I know where to get it, although it is an airplane ride away. If anyone would like to get some, feel free to get a hold of me..
By the way I totally agree – we haven’t seen the bubble. Gold’s going up, no matter what your personal opinion on the topic is.. it is going to go up, more than it already has. It’s just a matter of time.. when our paper money starts becoming worth less and less, gold will soar…
March 14th, 2009 at 7:08 pm
Gold cannot earn money. It just sits there. It actually costs money to store gold. Sure, its relative value could go up over time, but its hard to beat companies that routinely and regularly earn money on capital.
March 15th, 2009 at 1:46 am
Owning Gold will be the right thing as the dollar starts the ‘devaluation’ shortly. This will THEN go into forming the bubble. Right now, it is being snatched up by smart people and smart investors.
When there are no other options left, that is when people are going to start jumping to GLD, SLV, and Gold Bullion. Already coins from the mint are not available without a long lead time delay.
Also, it does not pay any dividends, but there are ETFs that do pay some dividends holding nothing but Gold and Silver.
Either way, holding Gold is like holding money right now. Buy it, and remember your purchase price. If you can sell it at a worst case of 3% gain in a year, you will break even with CD rates.
Don’t go out and borrow money to buy Gold.
I already own some right now, and will be INCREASING my holdings by 4X more since I know that the printing of dollars and spending this massive amount of $ from borrowed money (govt) will result in our dollar depreciating, which will devalue $ and increase price of gold (net result of lower dollar).
Kenny
March 16th, 2009 at 10:06 am
Just finished up some profit taking a few days before the last peak. Getting ready to get back in. Big time.
March 16th, 2009 at 10:06 am
Just finished up some profit taking a few days before the last peak. Getting ready to get back in. Big time.
March 16th, 2009 at 10:07 am
Just finished up some profit taking a few days before the last peak. Getting ready to get back in. Big time.
March 21st, 2009 at 8:57 am
What about the massive deflation levels we have today- credit going down, stock market going down, houses going down, cars doing down, employment going down. The fact that gold hangs at record highs is already amazing. Just why is it going to double or triple from here? I think if there is a perception of confidence in the market, gold is going down, quite a bit.
When you’re unemployed and need to eat, gold isn’t going to fill your belly. Sure if the govt gives each family $1 Million then gold is the thing to own. Until all this money gets into the hands of the people gold really has limited upside.
-Mike