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Is Gold/Silver in a Bubble soon to burst?

I'm considering purchasing silver coins, thanks to all those who have given me advice so far. But what is worrying me is this sudden spike in prices. It is obvious that the dollar is being devalued and it has been for some time. But how much of this increase in price reflects the actual value of silver compared to the dollar versus an over inflation of silver due to hysteria of the dollar crashing?

I guess the long and short of it is, should I invest in silver now or wait for the price to trough out and buy later? Obviously we all know to buy low sell high, and just looking at the charts, silver was at $4 dollars and now is at $35. That seems counter intuitive to be buying at such a high level.

Please give me your opinions.




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Necromancy

This thread is almost a year old.

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"Fully half the quotations found on the internet are either mis-attributed, or outright fabrications." - Abraham Lincoln

it's incorrect to call it a bubble

although the hard money advocates have been saying the same thing since 1913, if you've ever heard an Austrian asked to predict the date in which the dollar will collapse, he will inevitably tell you that you can not do such a thing.

a "bubble" is a concentrated point in the economy in which malinvestment has manifested itself due to a central bank interfering with interest rates. interests rates are key as they are important signals to investors in determining the long-term viability/profitability of an endeavor.

this is a short but more detailed explanation:
"Austrian Business Cycle Theory"
wiki.mises.org/wiki/Austrian_Business_Cycle_Theory

to call it a bubble means that you believe gold/silver a malinvestment due to cheap money.i believe it's result of rational evaluation of what the government is doing to your money. will it burst? not in the sense that you're thinking but don't kid yourself, it's volatile and subject to many variables. speculation is a dangerous business. so don't do it for that reason. do it for long term securing of your savings.

it is counter-intuitive to purchase something when it's at the highest point that it has been in years. it is still correct in my opinion for a few reasons.

you are reaching a unique point in american history where the vast majority acknowledges that the national debt is not serviceable. it will default (again.) when you consider the economic and political climate of the US, you can bank on the fact that the charade will come to an end. since 1913 the dollar has lost 99% of it's purchasing power. the end of the road MUST be ahead of us.

you have to decide if you trust the government and fed to be responsible.

nothing is 100%. you can not remove risk, only mitigate it. don't expect to come out of this making a tremendous profit. in this climate, the name of the game is simply not LOSING the value that you already have. you're looking at what will be a very long and painful process.

consider signing up for tom wood's liberty classroom (best bang for your buck @ $100 per year) if you want to learn basic Austrian economics and history on your own time and have access to professors and like minded people.

the mises academy offers similar services and are INCREDIBLE bargains.

mises.org is an invaluable source of free information as well.

[if you've decided to start buying, here's my rules: make your gold/silver purchases locally (avoid big brother), never pay retail and always verify the content yourself.]

it all depends on the growth

it all depends on the growth RATE of money supply. if you look at the 90's the growth went up and gold went down. even if there are deficits but they are smaller gold will go down. real estate is the best place to be right now.

oil will go down quite a bit

oil will go down quite a bit pretty soon, which will have an effect on gold speculation as well. not sure how much though. everything is a bubble in the cocaine induced speculator's casino, especially land.

Federal Reserve Notes are elastic by law.

One can use an elastic measuring stick to build a house.

One of the things I count on is that my tape measure will measure 48 inches today and 48 inches tomorrow and the same 24 inches 200 years ago.

Since the Federal Reserve was founded they have increased the Paper money supply and average of 9%/year.

Silver, Gold and Copper have reflected the increase of unbacked fiat money.

In 1912 a silver Dollar was worth I dollar $FRN. Today it takes 25 dollars FRN to purchase a Silver Dollar.

A Silver Dollar from 1913 and a Silver Dollar today has roughly the same purchasing power.

The same can be said of gold
Copper priced in Gold:
http://pricedingold.com/charts/Copper-1900.pdf

Silver Priced in Gold:
http://pricedingold.com/charts/Ag-1700.pdf

Dow Priced in Gold:
http://pricedingold.com/charts/DJIA-1900.pdf

Which measure of wealth is truer of the long haul?

Free includes debt-free!

if your worried about price

Aint nothing wrong with buying some Junk Dimes. Those are the Feds WORST Enemy.

His name is Edward Snowden

What is Capitalism?
http://youtu.be/yNF09pUPypw

Cyril's picture

Anyway, by all means, we CAN educate ourselves :

Anyway, by all means, we CAN educate ourselves :

Silver Supply-Demand :

http://www.silverinstitute.org/site/supply-demand/

Silver in the industry :

http://www.silverinstitute.org/site/silver-in-industry/

Silver, you, and your home :

http://www.silverinstitute.org/site/silver-you-your-home-2/

Like learning skills, it's a good use of our time.

Has always been, and we don't even need public schools for looking up the information WE decide is relevant and important for us.

Peace.

"Cyril" pronounced "see real". I code stuff.

http://Laissez-Faire.Me/Liberty

"To study and not think is a waste. To think and not study is dangerous." -- Confucius

I don't think that the value

I don't think that the value of gold is a great measure of the devaluation of the dollar. Base money, bond rates, and value in relation to other currencies seems like a better measure.

It is very possible that there is a bubble. That has been the historical trend for the past 30 years. Investors go crazy over the latest trend, bid it up, and eventually, it crashes and burns.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

why? Gold has consistency. It

why?

Gold has consistency. It has a stable supply and 6000 years of proven demand.

Base money, bond rates, and other currencies don't.

It seems like you are trying to measure how straight a line is by comparing it to a crooked line. Why does that make more sense?

Gold has long term stability

Gold has long term stability and a fixed supply. Recall that the us government also heavily regulated the price of gold to be consistent in the 1700and1800s.

Gold also has very high short term volatility. Just ten years ago,gold was at 400 an ounce.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

"Gold also has very high

"Gold also has very high short term volatility. Just ten years ago,gold was at 400 an ounce."

You are measuring against a crooked line again. Some would argue that the value of the FRN went down, that's why it takes more to get an oz of gold.

Variation

Look at the coefficient of varation (stdev of annual percentage changes in price level vs. the average). Between 1879 and 1913, it was 17.0. Between 1946 and 1990 it was only .90.

In regards to the value of the FRN:

Has the FRN gone down 6x in value since 2000? Gold has gone up 6x since then. The money supply (M2 and M3) is around twice was it was back in the year 2000. So clearly, gold is not just going up due to the weakness of the dollar.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

You aren't thinking about

You aren't thinking about this correctly... Gold was at $270 in 2000. So, if the dollar lost 50% of its purchasing power then gold would double to $540. If it lost another 50%, Gold would double to $1080. So, that would represent a loss of 75% of the dollar's purchasing power from its 2000 level.

But gold is probably making-up some ground from the 80s and 90s, so that has to be factored-in. But look at commodities since then...oil was on average $27 per barrel in 2000. it is now at around $90. This is about right... so the dollar in terms of oil has lost about 75% of its value from 2000.

So, it takes about 4X the amount of dollars to purchase oil now than it did in 2000. It also works different commodities differently and other consumer items.

Yes, but the price of oil is

Yes, but the price of oil is also being bid up by speculation. How does that factor into the calculation? I mean, forget about speculation; oil depends on so many things outside of the dollar's value. Look at the spikes when there were oil scares; obviously other things influence it.

"Making up ground" is not exactly a reasoning I am satisfied with. That can maybe happen over a couple of months; not over decades!

Also, look at how other currencies are doing. The Swiss haven't devalued their currency, yet their currency has not appreciated relative to the dollar very much.

The basic idea is that people do not solely value gold relative to its value to the US money supply. There are many other factors that go in.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

Gold prices were suppressed

Gold prices were suppressed during the late 80s and 90s... monetary expansion helped crack some of that suppression.

I don't have any idea what the Swiss have done.

Speculators can effect the

Speculators can effect the short term fluctuation in oil; why 5 years ago the price varied between $2 and $3 or now why it fluctuates between $3 and $4 can be attributed to speculators, but many of the overall increases are due to devaluation of FRN's.

as much as 60% of the price

as much as 60% of the price of oil is due to speculation (http://www.globalresearch.ca/index.php?context).

Back when oil was over 100, even the CEO of Exxon Mobile admitted that it should be between 60 and 70 considering just supply-and-demand.

Plan for eliminating the national debt in 10-20 years:

Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...

Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a

I bought 2 full bags of silver coins at $4.00+/oz.

Then when silver ran up to $7.00+ I rushed out and sold both bags.
Wish I had at least one of them now!Buy now and don`t look back.

It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people that pay no price for being wrong.
Thomas Sowell

Cyril's picture

The challenge for the knowledgeable

The big challenging paradox :

Gold is extremely scarce, while silver is getting more and more scarce, and yet the former isn't nearly as useful for an always more industrial and technological age as the latter.

Food for thoughts.

P.S.

Plus, we DO know how much both men and women CAN enjoy silver jewelry.

I have evidences around me. ;)

"Cyril" pronounced "see real". I code stuff.

http://Laissez-Faire.Me/Liberty

"To study and not think is a waste. To think and not study is dangerous." -- Confucius

My opinion...

The dollar has been the World's reserve currency since 1948. In that time the US Federal Reserve has been given the license to print money at their mostly secretive discretion to enable the purchase of world's oil needs and vast amounts of "dollars" now exist outside of our borders. At some point, sooner rather than later given recent developments in Russia and China, dollars will be spent in the only places that will accept them...a dwindling number as we speak.

This means that, on some fine day, all of the dollars circulating outside of our borders will be spent for value in the only place left that accepts them and a run on everything including used refrigerators and old chevy's will occur in the good ole USA. What do you think will happen to prices in the US when that occurs?

Extrapolate amongst yourselves...

Wha? .....hey....who stole my country?

Yes

and to that point you might be just as good off buying toilet paper and cigarettes, just have things that have value. Whatever people decide to do, just get out of FRN's.

Hmmm

How many rolls of Toilet paper or cartons of cigarettes can you transport in a '65 mustang? How many sacks of silver or tubes of gold coins??

You are correct value can be stored...how much value do you need to store...or have to store?

Further extrapolation needed....

Wha? .....hey....who stole my country?

Well certainly if you want to

Well certainly if you want to get away in a 65' mustang you'd want gold.

I think one thing that makes PM very attractive is the chance that the perceived supply is a lot higher than the actual supply. If that's the case the correction could be huge for people that have some physical.

2 other factors to consider (IMO) are
-what products are useful or you would need in the event of an economic breakdown and
-what products could be hard to get that people might really really want.

Although if you are way off, it might be easier to unload some PM as opposed to TP.

Yeah...that's my thought...

although cases of Jack Daniels or Johnny Walker might do you as well as (or better than) the toilet paper...at least with Jack and Johnny at your disposal, you'd probably not care if you didn't have the TP and even if you did, you'd probably have more "friends" to visit who might be able to help you out with your recurring itchiness...and some ice.

Wha? .....hey....who stole my country?

"Don't wait to buy gold...Buy gold and wait."

Of course that goes for silver too.

Whatever you can afford.

Just dollar cost average your way in - Don't spend ALL your money at once.

That way you end up buying less on higher prices and more on lower prices if you spend the same amount at a specified time (say each month for instance).

"We have allowed our nation to be over-taxed, over-regulated, and overrun by bureaucrats. The founders would be ashamed of us for what we are putting up with."
-Ron Paul

I do think a bubble will form in metals,

and there will be a time to sell, but I don't think we are there yet. All of the factors that would make them look like a good investment 5 years ago haven't changed.
-They are inflating the money at a frantic rate (QE to infinity has just begun)
-The supply demand factors - especially for silver - are favorable.
-There is plenty of evidence that the supply of gold and silver may be inflated due to the paper market and, well, not auditing "our" gold for 50 some years. When the realization comes that the actual supply is less than the previously perceived supply, the correction will be huge.

Here are some indications that PM's aren't in a bubble:
-Most people don't own any and the thought seems foreign to them.
-The 24hr Propaganda stations and the radio talking heads don't push it (other than when they are paid to)
-There isn't a show called 'Flip this Sterling Silver'

One thing to always consider is the spread

This means that market value for silver for example is 30 dollar per ounce to keep it simple. If you go to your local dealer you know the gold and silver buyer in your town they will sell it to you at around 32 dollars. Right away that is a 2 dollar loss. now lets say that you wait until silver hits 34 dollars an ounce to sell to take the profit or recover the value that your Federal Reserve Notes lost that same dealer will buy at a discount and probably only pay you about 28 dollars per ounce so you netted nothing in this case even though silver went up.

The reason this happens is not because your local dealer is making a huge profit but when he needs to liquidate immediately for whatever reason he only get 81% of the value for junk coins like dimes quarters half dollars and dollars that go to get sold on the open market. so if silver is at 34 he doesn't want to loose if he needs to liquidate so he is only willing to pay what he can get at liquidation price.

With fine silver like Libertys or Maples the liquidation rate is still fairly high at around 85% of silver value. Keep that in mind when you buy silver. the price will have to climb significantly before you can sell and get back what you put in (at-least 15% but more realistically 20%). I've been in the business for a few years now and know how it works.

Gold might be better if you can get it for little premium. For instance lets say today gold is 1700 a one ounce credit suisse might go for 1750 if you were to sell you might get 1650 so the spread although it appears bigger it is actually somewhat smaller of a percentage with gold. The value might only have to move up 5 or 10 percent before you can get back at-least what you put in.

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    One small problem

    Those values are denominated in Federal Reserve "dollars".

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    "Fully half the quotations found on the internet are either mis-attributed, or outright fabrications." - Abraham Lincoln

    Cyril's picture

    I went thru several milestones.

    I went thru several milestones.

    First, I've known, after study, and for 20+ years now, that the push for collectivism, either local or global is probably the most horrendous lie and insult to man's intelligence ever made. Putting entire peoples' lives into the spreadsheet equations of a handful planners. Like men can ever be angels and as uninterested. Yeah, right.

    Then, I learnt a bit more from time to time about the formidable, unpredictable economic forces of free-markets, including the black ones - black markets, yes, when an oppressing, PARASITIC, SWEAT SUCKING STATE attempts to subject and steal from everybody.

    Then I heard about Ron Paul, his stand, and on the positive side Austrian economics, the influential thinking of the physiocrats, vs. the negative side of the Federal Reserve Act, and the Jekyll Island meeting prior to that, which was THE EVIL PLAN of 1910 that Ayn Rand recognized and denounced early.

    Then I did further self-teaching homework on how the big picture of seeing gold and silver as real money for millenniums in all countries and nations now translates against the negative consequences of a global fiat money scheme cruelly shoved down the entire world's peoples throats.

    And I found this striking and factual evidence of how SCARCE and yet tremendously useful for our industrial and technological age silver had become.

    I really don't care about how silver will convert in USD in 5 years.

    I really don't care if it's $100 or $500 or $5000 or more.

    I really don't care if the USD even still exists by then.

    What I care is watching and detecting the signs, clues, hints, about the kickstart of the unavoidable PARADIGM SHIFT that is looming on the horizon only because the laws of Demand-Supply cannot but ...

    ... eventually RE-IMPOSE themselves. Soon or late.

    What I care is about the amount of it I'll have stashed for now I know better THE TRUE EXTENT of the millenniums-old Demand-Supply laws that govern the PURCHASING POWER of REAL MONEY.

    Peace.

    "Cyril" pronounced "see real". I code stuff.

    http://Laissez-Faire.Me/Liberty

    "To study and not think is a waste. To think and not study is dangerous." -- Confucius

    I would suggest you buy now.

    I would suggest you buy now. I personally believe that when the market crashes again; everything is going to fall, including the price of silver/gold. But remember, the market is based on the paper price. Once the paper price crashes, the physical price will sky rocket. If you wait until the crash and try to buy physical silver at let's say....$15-20/oz., you may not be able to get your hands on it...and if you do; you're going to pay a premium that'll make you wish you'd bought it when you had the chance.

    The percentage of American's that own physical gold/silver is in the single digits. Does'nt sound like a bubble to me.

    *Also, If we could predict the ups and downs we'd all be millionaires already!

    Check out these websites for some good info

    www.silverdoctors.com

    www.sgtreport.com

    www.brotherjohnf.com

    “How strangely will the Tools of a Tyrant pervert the plain Meaning of Words!” – Samuel Adams