Some begin to see a Gold Bubble
Some begin to see a gold bubble
The Daily Bell
Gold to $3,000? Maybe $5,000? Considering the flood of paper money the Fed has made available to halt the Great Recession and save Wall Street from itself, it's not hard to find folks who will to tell you that gold is destined to bust all records on its way to becoming the only store of value left in a debased world. Of course, ridiculous price forecasts often presage a bubble (remember the dot-com days?). And, some market watchers say the fundamentals for gold - regardless of the headlines - simply don't support such lofty numbers. Gold mines have responded to high prices with heavy investment, a sure sign that supply will rise, reports Fortune. Miners have dumped $40 billion into new projects since 2001, the magazine notes. Output is up 7 percent in just the first six months of the year. Meanwhile, industrial demand is falling on a weak economy. Simultaneously, retail investors have dropped billions into gold via ETFs in hopes of a big payday ahead. As a result, gold now has "some of the poorest fundamentals I've seen in the market for a long time," Kitco analyst Jon Nadler told the magazine. Kitco is a bullion dealer in Montreal. - Money News
Dominant Social Theme:
Beware of bubbles.
Free-Market Analysis:
This is more economic misinformation, insofar as we are concerned - though admittedly the Bell has a hard-money orientation and is anti-fiat (as regular readers may have noticed).
Perma bear
Jon Nadler is a perma-bear on gold. He works for Kitco. I wonder if Kitco has uncovered short positions.
On the day when gold hit an intermediate low around 690, Nadler was predicting 480. Instead it's gone to 1060 or so.
Nader is fixated on Indian jewelry demand, which is cost sensitive. But now China is encouraging its population to buy gold and silver. How is that going to work out?
Miners can only affect the supply of gold by a very small amount. Most of the gold ever dug up is still around. Very little is used up. It's not cheap to dig up either. Some miners have operating cash costs in the 600's. Add to that opportunity costs, depreciation, and risk, and there's not a lot of margin. The big expense in digging it up is energy. Oil is rising again, you know. There's no risk that miners will flood the market selling gold at a loss.
Me? If the bottom does fall out of the gold price, I'll happily buy a bunch of it. I bought at 660, sold at 920, and re-bought in the 700's. I'm through selling.
nadler is an idiot... one
nadler is an idiot... one other thing about production.. South Africa is producing way less gold because they can not get the electticity needed to run the mines.
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
Matthew 10:34 Think not that I am come to
send peace on earth: I came not to send peace,
but a sword.
Comparing Gold to the dot.com boom\bust is comical
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$40 billion for all new mining projects since 2001.
Didn't we spend like 4x that just bailing out AIG? A fraudulent entity who's executives continue to reward themselves with lavish bonuses.
The point is it's really not that much money, and there was even less money spent in the 80's and 90's. There is only 4 billion oz of gold in existance, which isn't much for 6 billion people. All the "easy" mines have been found and exploited.
However, I do feel all warm knowing the same financial rags that perpetuated both tech and housing bubbles are now all concerned for our well-being.
Oh yeah, and Nadler sucks!
They can print faster than they can extract ore
The price of gold falls when there's confidence in fiat money and there's growth in the real economy. If you're confident that situation will be arriving soon, then gold probably looks overpriced.
The Cost of Doing Business.
Like everything else that requires labor, machinery, trucking, power, refining, and more, until these associated costs go down, which they haven't since the federal reserve received the right to create unlimited amounts of FRN's, Gold prices "Must" rise to keep the mines open.
Nevada is in the top 4 when it comes to world Gold production, a little known fact that the American government tries to keep hidden.
Demand for Gold has not peaked, since the millions of Chinese were only recently given permission to own Gold in their Communist country.
Ron Paul sets the best example for those who worry about their own personal financial future, by putting his extra money where his mouth is in Gold/Silver investments.
Those in the know, are buying Gold !
Ron Paul is my President !
beesting
The "price" of Gold has very
The "price" of Gold has very little to do with Gold itself. The misleading part about gold prices is that "price" is not the same as "value." A price only tells you value denominated in something else. As with gold, the value is priced in dollars.
Gold's "value" doesn't change a whole lot, it's extremely stable. The price fluctuations mostly come from changes in the value of the USD.
Check out this chart and let me know where you think the bubble is: http://www.kitco.com/ind/Turk/images/feb252008_1.gif
If gold does develop a bubble then what that means is that there is bubble of negative sentiment against the dollar.
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Good example. Dollars are
Good example. Dollars are just printed on a whim, gold needs to be found and then mined and it is a limited resource unlike paper which grows on trees!
Nice
Nicely put.