Looks like a bubble to me

Discussion in 'Bullion Investing' started by cjh1985, Aug 17, 2009.

  1. cjh1985

    cjh1985 Senior Member

    I don't follow gold much, but it seems to me it could be the next bubble to pop.
    Correct me if I'm wrong but gold has gone from about $250 an ounce 2000 to about $950 now (14% return on average). Almost 10 years in a row without so much as a 20% pullback. Through 2 recessions and 2 stock market crashes, it has gone steadily up. And what gets me is, gold isn't even used for anything, except maybe jewelry and coins.
    We humans just go from one bubble to another. Some will say "this time it's different", "Inflation is around the corner", "interest rates will go up" - well if that's the case then why has gold been going up for 10 years when interest rates and inflation have been coming down?!?.
    Just my humble opinion - thanks for listening.
     
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  3. Tater

    Tater Coin Collector

    Interesting.
     
  4. cjh1985

    cjh1985 Senior Member

    . . . been thinking about this some more and reading other threads (hey, I'm stuck in Clovis, New Mexico for a couple days, what can I tell you!! - actually a fairly nice town :)).
    Since only 10% of gold is used for industrial purposes, that is not the reason for the increase. And obviously increasing inflation or interest rates are not the reason.
    What may be a big part of the increase (hey, I never said I was the sharpest tool in the shed - heck, I'm not even in the shed!) is the wealth in the world's population centers (India, China etc.) has been increasing and so too the purchase of gold jewelry. Now that makes sense to me!
    The problem is, like oil, the higher the price, the more mining occurs, and eventually the price comes back down to earth. It may not be tomorrow, or next year, or two years, but it will happen relatively soon. Just common sense, IMO.
     
  5. Hobo

    Hobo Squirrel Hater

    Gold is so much more than just pretty. It has numerous practical uses. In fact, gold is one of the most useful minerals known to man.

    Gold is a superior electrical conductor that is resistant to corrosion. It is used in connectors in high-tech electronics, e.g., computers, cell phones, calculators, GPS devices, televisions, etc.

    Gold is highly reflective and is used to shield satellites and spacecraft from harmful radiation in outer space. Gold is also used in lasers to highly focus light energy.

    Gold is chemically inert and nonallergenic. This makes it especially useful in dentistry and medicine. Ever heard of a gold tooth? Because of these properties some medical implants are made of gold.

    Gold is very malleable. It can be beaten into thin sheets that are used to cover the domes of buildings (e.g., the Georgia State Capitol Building), other building surfaces, picture frames, etc. Gold leaf can be used to gild paper, glass, wood and many other materials.

    These are only a few of the many other uses of gold.
     
  6. Yankee

    Yankee Senior Member

    I understand that gold is a very THIN trade. because of its rareity in the world it doesnt take much buying to send the price up!. This week I am buying more are you?
     
  7. jstevenson

    jstevenson Junior Member

    Some people consider gold to be money and a store of value.
     
  8. krispy

    krispy krispy

    Was it the economy, the price drop or the contest win that encouraged you to buy more this week? :eating:
     
  9. Cloudsweeper99

    Cloudsweeper99 Treasure Hunter

    Rising prices are not a bubble. Bubbles are characterized by widespread public particpation, the use of leverage, and parabolic prices. Think about NASDAQ stocks in the late 90s and real estate several years ago. Gold prices do not exhibit any of those characteristics. I doubt that gold makes up even 1% of total portfolio assets. It has a long long way to go.
     
  10. Danr

    Danr Numismatist

    In fact you may turn out to be correct but you will not make friends around here with a post like this.
     
  11. Cloudsweeper99

    Cloudsweeper99 Treasure Hunter

    This part of your post deserves a bit more of an answer. First of all, there is a lot of evidence that inflation rates are and have been higher than the reported numbers for the past decade or more, ever since the calculation method was changed. Related to that is interest rates. Gold does very well when there are negative real rates of interest. So with real inflation somewhere in the 4% to 10% range [depending on how you measure it and who you believe], and interest rates around 1%, gold becomes the choice for preserving purchasing power. It's a little bit complicated to see the inflation now because many prices are falling even though the money supply is exploding. But this newly printed money will work its way through the economy in time.

    And don't forget that markets are typically forward looking, so higher gold prices now compared to several years ago might just be a forecast of much higher future inflation sparked by the bottomless pit of government spending.

    If you get your investment advice from the government telling you that all is well, then ignore everything written above and avoid gold in favor of long term bonds. ;)
     
  12. cjh1985

    cjh1985 Senior Member

    That's an interesting comment.

    I will think about what I wrote.
     
  13. Cloudsweeper99

    Cloudsweeper99 Treasure Hunter

    Your post was not offensive in any way. Please don't change your opinion to conform to the crowd. Just base your opinions on the facts as you understand them. Don't blindly believe anything you read here, even if it's from me. :thumb:
     
  14. cjh1985

    cjh1985 Senior Member

    Thank you for that comment, Cloudsweeper.
     
  15. Dammage

    Dammage Junior Member

    Haha. I think we've had a few disagreements.
     
  16. Cloudsweeper99

    Cloudsweeper99 Treasure Hunter

    You should never believe anything that someone says on the internet without checking it out because you have no way of knowing how credible the source is. That said, everything I write here about markets for gold and silver is heavily researched. But you have no way of knowing if I'm telling the truth so you are free to disagree [at your own peril]. It's complicated.
     
  17. elaine 1970

    elaine 1970 material girl

    bubbles. not really. moving up. soon.
     
  18. ontime1969

    ontime1969 Junior Member

    I thought the reason gold was very strong today is because the US dollar value has been dropping at a steady rate for a while? What will happen when our dollar rebounds? Will the price of go up to keep it even or will the price of gold just go down in comparison to the dollar?

    These are questions cause im a newbie, My education is in science and medicine, I know nothing about this stuff.

    It just seems that gold has a world wide market and it should not change in light of any one country's currency flux. So if the US dollar is down then gold costs more. I always thought that buying gold was like betting against the dollar. I maybe way off base, what do you guys think?
     
  19. Victor

    Victor Coin Collector

    You are on the right track. A dealer I go to has a bid board and always has 2 or 3 NGC slabbed MS-69 tenth ounce AGEs up for bid. There is one bidder who monopolizes the gold by placing higher than normal bids. It used to be that a bid of $125 would win the coin. Now this bidder starts his bidding at $125. You have to go to $130 or $135 to win a slabbed tenth ounce of gold now. And add to that the 6.25 percent Massachusetts sales tax.
    So if this gold hoarder is buying up every tenth ounce he can get there must be a plan in his mind.
    I am with the bulls here that keep saying "Buy, buy". My first tenth ounce coins cost me $59 shipped. Recently sold one for $120 and kept one. Then I got a bunch at $70 to $79 a few years back. Now my last one was $112 from eBay. I have yet to pay $120 or even $125 but I feel that day fast approaching.
    There are those that will say "Why buy the tenth oz.? The premium over spot is the most compared to other fractionals." Because my opinion is that they are easy to sell when that time comes.
     
  20. Curio Bill

    Curio Bill Junior Member

    I hope that it someday soon does come back down (I want a couple of double eagles for less than $2k each!!), but I do think that is kinda "tooth fairy" hoping....
     
  21. cjh1985

    cjh1985 Senior Member


    Looking at a couple of your other posts, I assume you are being facetious.
     
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