Commodity bubble ???

January 2009
Gold - $905.10
Silver - $11.56
Copper - $1.51
Wheat - $6.62
Oil - $54.58
Beans - $9.63
Corn - $4.75
Rice $16.13
Cotton $.495

November 2010
Gold - $1360.00
Silver - $24.94
Copper - $3.84
Wheat - $6.98
Oil - $84.82
Beans - $12.37
Corn - $5.77
Rice $14.56
Cotton $1.27

 

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You think the dollar is devalued now, just wait until we get two more years of 'quantitative easing'!

 

Silver sure feels bubbly to me, but January 2009 was a pretty dark time. With commerce of all kinds on the skids, commodities used for manufacturing were depressed. That copper quote was a five-year low, and the silver price was the bottom of a dip in what otherwise looks like an exponential climb.

 

To me two major trens are happening right now. One is as Race said US dolalr devaluation. This makes it appear to US purchases that prices are increasing when they are not, the US dollar is falling.

Second is "hot" money. This is money that chases different assets looking for returns. Right now it is in commodities, they were in dotcom stocks, then real estate/REIT's. What will deflate this bubble will be another hot category picking up, maybe Asian stocks, housing again, land, etc. It cycles continuously from one area to another. To me the trick is to buy asset classes that this "hot" money isn't in yet.

 

Apparently, that would be Rice !
:too-funny:

 

It took me a while to learn what the fedspeak term "Quantitative easing" means. Right now they are buying back previously issued treasury notes at these low treasury set prices. That means Billions and Billions of dollars are entering the economy all at once. For some reason, easing means they want to make it easy to get dollars. Their convoluted rationalle is that more dollars stimulates business. If you check your calenders and use the WayBack machine, we had just such an easing back in the 1970's, and it was called inflation. So they CUT borrowing rates recently to stimulate the economy. Then they ditch gobs of paper on us in a way sure to increase inflation. Does anyone remember what they RAISED the interest rates for, which collapsed the housing market by making homeowners with baloon mortgages? Well they said it was to slow the overheated economy. So they increase borrowing rates to slow inflation, then they lower lending rates, with the stated purpose of getting the sluggish economy moving. More money means more dollars bidding on the same or even lesser levels of goods. Housing is kaput. They speak with two tongues. Hold onto not only your hats, but your wallets too.

 

It's a bull market for sure, but there are no signs of the panic buying or frenzy to acquire the commodities that mark a bubble. When you consider the rate of growth and size of demand from Asia, it would be remarkable if the prices didn't go up that much. If you want to see the real bubble, turn around and face 180 degrees in the opposite direction and watch the bond market.

 

most regular people don't own any bullion besides jewelry, and more of them are selling it rather than buying. Alot of investment money is chasing the commodities for many of the reasons in previous posts.
Remember you get about 0 in a money market and about 1 to 1 1/2% in a cd. More *normal* people are going out on the risk curve in their mutual funds and stock investments. That is the main cause of the metals run up. The key is to get out before the party ends.

Lack

 

I am not convinced that panic or frenzy is required to produce a bubble. Most of the traded commodities are small markets very vulnerable to speculation by large institutional investors.

 

In my neck of the woods that is changing real fast. I was in two coin shops and four jewelry/bullion buying stores yesterday and they all could not keep their bullion on the shelves. One store was actually holding on to everything that they`re buying until the PMs go up even further. They all said that new customers were buying the PMs at rates they had never seen before.....I see it with my own eyes as well....every time I`m in a shop there is someone buying bullion.(not including myself)

For as many people that are selling various jewelry and or bullion/coins there is someone always looking to buy as well. It keeps collectors of older bullion like myself on alert as I have already missed out on some good silver art bars in various shops. : (

 

Smart man! There have been several articles in Forbes and someplace on the net about some Asian countries, who allow foreigners to buy stock on local companies, housing and even beach land, complaining that the prices are being driven up to where they can't participate. Yes, the USD has depreciated against the major currencies, but evidently many minor currencies are worse off.
​

 

Many countries are intentionally and consistantly devaluing their currencies to increase exports by lawering their prices in foreign markets, and thus ignite their economies. This seems dangerous to me, as future negative consequences are likely to follow. I hope our country does not follow this path.

 

Europeans seem to buy and hold more gold than Americans. Some will explain they have been through two wars on their soil and have seen paper money collapse on both occasions.
I was just in Helsinki , & Stockholm. I have a long time friend in Finland who lives on a small island. His father says they always try to keep gold as a hedge and in larger quantities then we would consider. He keeps about thirty percent in gold and silver ( Philharmonics ) . We have seen inflation but not war and inflation together on our soil.

Pep

 

+1

You ain't seen nothing yet if we continue this disastrous track of QE.

 

What beans rose!!!! This is madness!!

 

Most gold products are exempt from VAT in the EU, and in the case of Britain legal tender gold coins such as Sovereigns and Britannias are exempt from CGT as well... EU governments at the EU and national level seem to want to encourage us to buy as much gold as possible...

 

A bubble for sure and the devalued U.S dollar

To my American Coin Talk friends,here in Canada,it was not long ago that in order to buy $100.00 U.S. here in Canada cost me about $150.00 Canadian dollars.I recently went to the bank,November 2010 and in Exchange for a $100.00 U.S. note I received around $96.00 Canadian dollars.This is an example of how much the U.S. dollar has devalued and this should be a wake up call to all of you.The U.S. dollar is crumbling and crumbling fast.You can't simply print your way out of this situation as politicians would like you to think.
A normal household does not deal with debt this way so why do governments?
So,for those of you thinking about selling your gold and silver at these high prices think about what you are getting in return.You are getting worthless,overprinted paper.
I know it is hard to resist selling at these prices but stay firm,and don't lose track of why you bought gold and silver to begin with.

 

This is exactly what they're doing. The whole reason Bernanke keeps saying "a little inflation would be good for the economy" is because money printing devalues the national debt we've incurred. In other words, if inflation grows (or skyrockets) 13 trillion worth of debt 'seems smaller'. A short term fix. Their policies will help devalue your debt too but also devalue whatever paper savings you have stashed away. The government doesn't care about the latter because they don't have any savings to worry about. They have only debt and incoming tax revenue to contend with.

Rush2112 makes an excellent point.

BTW, to the OP, I don't see it as a bubble. I think the prices are just rising by default. You can't print trillions of new, phony dollars and expect the price of commodities to remain stationary at past levels.

 

Wait until you buy your Thanksgiving turkey, and see what the increase in the price of corn has done. No surplus turkeys this year according to the industry. Costco ordered theirs in Feb, but no one else did, and they can offer at the lowest profitable price. Some food chains will still offer below their buying price to get you to load up on other supplies at their price.

The local gold/silver exchanges told me that on the peak days, people are in line to sell, but on low days like the last couple, the stores are empty. Coin stores probably get some buyers then though. But still no evidence for anything close to hyperinflation IMO, so panic buying has a way to come ( if it does). Remember, much is based on the perception of the average citizen, and here in this county with unemployment over 25%, the average citizen isn't buying anything except for survival, and they would gladly see the increase in debt ( and lowering of the dollar)for the US, if they could get a job somehow out of it. Just my opinion.