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EmailIs Gold In A Bull Market?
Friday, May 28, 2010
Executive Summary
- Asking whether gold is in a bubble or a bull/bear market misses the point.
- Better questions to ask involve fiat money management, government responses, and financial market risk.
- Gold is not in a bull market; rather, faith in our decision-makers is in a bear market.
- Trust is hard to come by these days.
- As for whether or not to buy gold, there are a number of factors to consider.
I'd like to clarify my views on gold, because I approach this topic from a unique perspective that I think has value.
For most, the idea of investing, or even speculating, is a matter of placing one's money somewhere with the anticipation of getting more money back out at a later date. Naturally, the footnote to this expectation reads, "...assuming money is worth the same." In this idea of investing, 'more money' is assumed to be synonymous with 'greater purchasing power,' because devalued money may represent a significant loss. The shifting target in this story since 1971 has been the untethered value of the currency itself.
For many investors, it has been a useful frame of reference to define various asset classes and markets in terms of being either "bull" or "bear" markets, where prices for investments have risen or fallen over some period of time, respectively.
Sometimes, when a bull market ramps out of control and then crashes, it is said to have been in a "bubble."
Recently, the WSJ asked the question of whether or not gold is in a bubble, which is an important distinction for many investors, because if the answer is "yes," then the next question is, "So when will it crash?"
Your faithful information scout,
Chris Martenson
Copyright 2010, Chris Martenson. All rights reserved.
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Comments
I think one problem is that the world tends to look at PMs in terms of $/unit, like most things. But is it not really more like units/$ ? In other words, we tend to set the value gold in terms of how many dollars it takes to buy an ounce, when we should be looking at how many dollars an ounce of gold buys...
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Thank you Chris.
Gary Tanashian of biiwii.com had this to say about gold this morning in his free blog (I know you and Gary admire each other's work):
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Friday, May 28, 2010
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Yeh, you...
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I believe that as long as real, short-term interest rates in the US remain negative, the US$ price of gold will remain in an uptrend.
While conceptually simple, the severe noisiness of the real ST interest rate series, and difficulties in arriving at a trustworthy inflator/deflator with which to adjust the nominal ST rate makes execution nerve-wracking...
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Chris...
Consider watching derivatives (the myriad of vehicles toward managing risk) that functionally, per my definition, behave as 2nd and 3rd order indicators, and any relationship w/r/t gold/silver.
Risk...trust...
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SteveS wrote:
Gold is the constant; dollars are declining in comparison. Gold is not in a bubble, dollars are in a tumble.
I'll second that and modify to "all fiat currencies" are in a tumble.
It seems from a novice perspective that of late gold has held fairly level while equities have been a crap shoot...
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Gold will continue to do well as long as the debasement of currency continues worldwide. At some point the fear factor will probably drive the price up exponentially (people in Greece were paying $1700/oz a few weeks ago), and that will be the time to watch very closely for a good time to exit gold positions and move more into energy & farmland...
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Here is a very timely article that has been making the "Goldbug" rounds lately. See what Warren Buffetts dad had to say about the shiny stuff.
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I like gold & own PMs but when I compare one of the 1 ounce gold coins to be worth 1 year food supply at this moment it takes on a different meaning of true value. It will be fun to see how this relationship holds up in the future. Look at the shelf life of this...
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This is the best I have seen of Marc Faber. It is rather long but well worth the watch. He talks about Gold more toward the end. One thing I think is important about Marc he is a VERY street wise man. Many important points made by him. Also the link to Steve Wynn's interview on CNBS is good...
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I caught that Steve Wynn segment at lunch today. My jaw nearly hit the floor: A - That he said what he said, and B that CNBS allowed what he said on the air. Stunning.