pop goes the bubble?

Have we in the last week or so burst out of the bubble that was holding gold/silver back?If so why? Is the euro going down to blame,a european depression that looms,an oil spill,supply and demand,or other evil forces at work here? Tell me what you think???

 

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What goes up must come down...

I'm gonna go ahead and stick my neck out with what you might call an obtuse statement. Gold and Silver will rise through early to mid July, then will level off and pull back to January levels by early November.

This is assuming that the economy continues to add jobs and growth becomes more driven by consumer spending. We'll see, anything could happen at this point.

 

There is no such thing as a sustainable growing economy based on consumption. Only economies based on production, not consumption, are able to do this. The bubble heads in the media parrot this "consumer driven economy" over and over but you simply can't consume your way to wealth. Of course these are the same people who tell you that gold is an archaic relic of the past.

The production i.e. wealth creation, economy of the USA has been gutted over the last 30 years and replaced with a debt driven consumerist one. Now that credit has dried up, so did the illusion that we have anything.

Our economy is not adding real jobs at any significant rate.

 

well said :thumb:

 

There are good points in this post.

 

I agree with the job part! low paying jobs are not ment for adults to support there familys! We have a growing number of UNDER employed ppl in this country,we have lost jobs that arent ever comming back,and yet those in power keep tell us how great the picture is?? Hey does anyone have an extra pair of rose colored glasses i can buy?? LOL

 

In some respects our economy is in fact "consumer driven". With fewer jobs available less people are working which means less money in the economy to turn the supply/demand wheel.

The purpose of the so called bail out was to put money back into the hands of employers so they could put people back to work so they would have more money to spend on goods and services which in turn further stimulates the economy by driving up the demand for these goods and services which creates more jobs and so on.

I am not a fan of how the bail out was handled at all, but something did need to be done to help turn the economy around from the brink. We are not completely out of trouble yet and it's still anyone's game at this point.

 

You should hear the county and state officials crying around these parts (long Island) because the sales tax isn't generating what they were projecting. Means only one thing. Folks aren't out there buying like they used to.

 

None of the money went to employers. It went to the banks and in the banks it stayed. It wouldn't be far off the mark to call it the largest theft in history. Nothing needed to be done other than to make the credit default swaps [and other derivatives where neither party owned the underlying security] illegal contracts and recind all of them with no gains and losses to either the buyer or seller. But instead, money was taken from the taxpayer, given to the banks, and the banks might lend it back to the people at interest. So the people get to pay interest on the loans, and interest on the debt created to bailout the banks. It's immoral.

 

So, what everyone is saying is... if gold were to tank and cause a segment of the market to collapse, they'd probably get bailed out too. It must be pretty sweet to have a job and not actually have to work!

 

There is not ANY direct correlation between the price of gold and jobs. Gold, as it is being discussed here, is nothing more than another currency. But it is a unique currency because it does not come with any specific government liabilities so it's worth does not change. What does change is the ability of the fiat currency issued by any given country to buy it. In the case of the USA this is the $.

So that means if the currency is strong and is backed by sound governmental and fed monetary policy, then the price of gold falls because it's paper currency is strong. When the $ heads towards being worthless because the government creates too much money relative to the economy (it borrows), then gold rises in price. It can't be more simple than that.

Here is a very simple example. if you are stuck on rescue boat with some other people and you have a bottle of water in your pocket. Because you are a dog eat dog Mr capitalist, you decide to sell it to the highest bidder on the boat. So bidding takes place and the high bidder wins the water for $10. The price of water, then, in that small economy is $10. However, one of the passengers realizes he has $100 in his pocket. The price of that water just changed to $100. The value of the water didn't change. What changed was the currency's ability to buy it. .... Now suppose civil order breaks down and a fight breaks out. What do you think they will be fighting for? The water or the paper dollars.
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If you believe that, then it should be easy to understand that we are not talking about the price of gold, but rather the ability of the paper currency, the $ in the case of the USA, to buy gold. The price of gold will begin to fall if the government adopt policies that makes the $ stronger. So the real question is "what has been changed" to increase the ability of the $ to buy an ounce of gold?

 

People are always making up survival scenarios to make various points about the value of money or gold. Since not one in a million people get into this situation during their lives, and have to deal with the boring reality of the real world, it isn't really relevant to the investment decision making process. Something must be reasonably probable before it becomes a factor to consider.

 

You are absolutely correct about where that money went, I was just pointing out the way it was supposed to go, hence my disclaimer that I didn't agree with how it was handled.

 

You totally missed the point of it when you took that paragraph out of the context in which it was presented.

 

There is no other context for it. I understand the popular internet theory that the value of gold is a constant and it is the dollar that fluctuates. But it's wrong. The value of gold wasn't even a constant back in the days when it was the currency of the land. Its value is subject to supply and demand, just like everything else. The price of gold did not go up 5X in the past decade because the dollar dropped 80% in value. For a theory to be valid, it also has to work in practice.

 

Oh, I very well understand the underlying problems with the US Economy... the past decade of growth prior to this recession was debt fueled, and you simply cannot sustain economic growth like that. There definitely needs to be a balance between consumerism and production, as you stated.

I was talking in terms of short-term growth, what I'd expect from the US economy over the next 2-3 years, and how that would affect the price of PM. Assuming the country continues to... ah, "recover," PM prices should drop as the dollar appears to strengthen, especially with the problems going on over in the EU.

 

Probably one of the best statements that I have seen on here in a long time. I've been saying this for awhile, but it falls on closed ears. We need jobs that create products not just services. The same industry and business that made America Great in the last century have been sent over seas. I understand the need of a stable world economy but things need to be fair. We just need some politicians that can address some of the very hard social and economical issues that our society has right now. We need a true leader. Off of the soap box. I don't know what PM's are going to do. Buy or Sell the million dollar question right now. Right now I am doing both. Search out the good deals and try to sell as high as you can. I am hoping for the summer cool down so I can pick up some more silver.

 

I agree, but the euro has been stressed and the dollar appears to be strenghting but PM's continue to rise.

 

Which I find curious. Unless the dissolution of the EU is imminent, I see no reason for PM's to continue their rise, save for fear of a catastrophic global economic meltdown. But as I said, what goes up must come down... buy some inverse-traded gold funds this summer and make some money.

 

Luv, every dealer in Europe is currently out of gold and there is panic buying based on various fears taking place over there including one where people believe the DM is going to be re-introduced this weekend.

Yet, despite this, the price of gold for these items is still set by the currency's ability to buy it. This is why they ran out of gold. If it was supply and demand then prices would have risen to the point where there would still be gold to sell there as there is plenty of it which can be imported. It's simply nothing more than a currency exchange and world prices for gold currency have not been affected. It's a difficult concept to understand, but currencies are not subject to simple supply and demand theories.