Is Gold in a Bubble?

I would say not. Too many people are either ignorant of gold or view it negatively. (I like when the talking heads on CNBC refer to gold bugs as crazy survivalists sitting in a hole in the wilderness clutching a shotgun).

I will look for fear buying as a sign we are heading into a new stage with gold. When large numbers of people start seeing it as some kind of last available shelter from the falling sky I might want to edge closer to the exit door.

I remember back in the fall and winter of 08', alot of investment advisers for wealthy, high-end people were saying their clients were asking about Krugerrands and gold Maples. Those were the upper-class folks. I think we need to see more average joe-six pack types buying coins before we can talk about a real bubble.

Gold: Signs of a Bubble?

Mark Faber on How to Trade the Dollar : "This is the short of the century ..."

Some comments of note include Dr. Faber's belief that stocks will rise by about 7% per annum but any gains will be eaten by inflation. Also he repeated a criticism he has made of Bernanke and Greenspan numerous times in the past; that they have succeeded in creating a bubble in everything (that doesn't sound good).

He likes Asian equities and of course, commodities. He advised people to buy physical gold and to store it out of the country.

On the subject of inflation, it seems to me that the 'lame-stream' media is becoming more accepting of the view that the dollar is going to lose significant value over the coming years. I suppose there will be a bubble in gold at some point, when everyone will be running to it, but I'm sure that day has yet to come.

Marc Faber Takes on Krugman, Links Bernanke and Mugabe

Advice from Dr. Doom

Some sensible advice on how to hedge against inflation. Don't listen to the USA rah rah rah morons on CNBC who think the dollar is king just because they get teary-eyed when the Star Spangled Banner is playing. There are a lot of things about America I love and respect but it aint' the country it used to be and it is not a rising star right now - nor is its dollar.

Faber Says ‘High’ U.S. Deficit Will Spur Inflation

Inflation, Boom, Bust

Here is an article with a great quote from Ludwig von Mises on inflation and the different stages it goes through. We are destined to live in interesting times ...

The Crack-Up Boom

Even More on China and Gold

Yet another article on the influence the Asian elephant could have on gold.

Interesting how it is mentioned that gold is being promoted to the common man in China. (I bet Jim Cramer is giving the ole' bullish 'boo-yeah' to some financial stock as we speak) :

"As recently as 2002, the private ownership of gold was prohibited in China. You could be jailed if caught with any in your possession. Beginning in 2009, in a stunning about-face, the central government removed all restrictions. In fact, as Mineweb and other sources report now it’s actively pushing folks to buy some personal metal, with China's Central Television, the main state-owned television company, running news programs cum[sic] infomercials, letting the public know just how easy it is to purchase gold and silver as an investment."

Article : What The Heck Is Going On With China

More on China, the Dollar and Gold ...

This article confirms what many have been saying about China edging towards the exit door at the dollar party.

Two important points I want to emphasize :

1) China wants to decrease their exposure to the dollar (bearish for the dollar)

2) China is looking at gold as one of the many places they could park all that money (bullish for gold)

Here's an interesting excerpt. (The man quoted is Cheng Siwei, a former vice-chairman of the Standing Committee in China) :

"“Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets,” he added.

The comments suggest that China has become the driving force in the gold market and can be counted on to buy whenever there is a price dip, putting a floor under any correction."

Chris Martenson on Gold Bashing

This is a great piece by Chris Martenson where he takes apart a mainstream article that puts down gold as an investment vehicle.

Dr. Martenson makes some guesses on why people in the mainstream media are always attacking gold - financial self interest being one of them. Whatever the reason, I think that this tendency to trash gold comes from very few people initially (just like a lot of 'views' and 'opinions' we see in the media) and then is simply repeated by the rest of the talking heads.

I know one thing. Gold (and other precious metals, most notably, silver) are excellent means of defending your wealth from the stealth theft that is inflation. So it would make sense that the Masters of the Universe would want us peasant folk to avoid it and invest our money in Goldman Sachs and the like.

Martenson article

Reuters bilge

Peter Schiff on the Gold/Silver Rally

He makes the important point near the end that China is planning on dumping the dollar. That is sure to be a gradual process so perhaps 'dumping' is not quite the right verb to user but he is absolutely right.

It's good to see guys like this doing an end run around the talking heads of CNBC and speaking straight to the people. Viva la internet!

Link to Video

China, Russia and Others to Increase Gold Holdings?

Jeff Nichols believes some big players in the world have much gold buying to do in the future. Moreover, he uses the fancy-sounding phrase "over stimulative monetary policy", which means lots of trees are being cut down so your bank account can depreciate in value.

Nichols : "We are bullish on gold for the next few years, largely because of our reading of the macroeconomic situation - and the high probability of an overly stimulative monetary policy for years to come. But a more positive official section attitude - with some countries wishing to increase the proportions of official reserves held in gold - is simply one more support for a much higher price over the next several years."

Article

Gold in the News ...

Gold has been going sideways for awhile now and somethings gotta give. Here's an article speculating on where the give might go.

More crystal ball peering here.

Meltdown 2.0?

An article like this on a main-stream site like Marketwatch.com is worth a look. Mr Farrell argues that we are getting set up for a bigger meltdown in the near future. (Here is the article, it has two pages).

I have heard the argument made that we will have a big bull run as a result of all this money being created and all the CNBC types will pump it as the return of good times. Then we will have an even bigger crash. Based on the enthusiasm with which the powers that be have provided more dope to the addict rather than let the bastard sweat the junk out of his system, I concur.

I also think that the social mood has a significant effect on the stock market. And this article is one example of the darkening of that mood. I think Obama will be a 'one-termer'.

Mr Farrell also writes about how this will happen :

"The culprit? The Fed, Ferguson says: "Without easy credit creation a true bubble cannot occur. That is why so many bubbles have their origins in the sins of omission and commission of central banks." So the next bubble (and meltdown) is virtually certain, thanks to Washington's $23.7 trillion explosion in debt."

It is too damn easy for people to get credit these days - too easy to go into debt. This does not make for a sound economy (though I imagine it makes certain parties quite rich).

I wish I knew exactly how to trade gold in light of all the inflation vs. deflation debate going on. No one can say for sure how it will play out. (Marc Faber has said there will be deflation first - then inflation through the roof). I think he's right and I would have no problem putting 5-20 % of my net worth in gold and silver and leaving it for 5 or 10 years. But he also has predicted volatility in all asset classes, just as a natural part of navigating the rough seas we find ourselves in there days.

For many of us, the best advice is probably to try not to figure out the short term and focus on the fundamentals : FUBAR.