Friday, Mar 14, 2008
When even the shoe-shine boy is piling in, it's time to SELL!
CNN: Getting in on the gold rush
CNN joins in the gold-ramping by telling people how to join in the latest craze. This is just another speculative bubble - the money went from tech stocks into real estate and now on to metals.
The current gold price is being driven up by investors purely on the expectation that prices will rise even further.
This is the hallmark of a mania-driven bubble.
The goldbugs deserve to get burnt every bit as much as the greedy BTLers who fell for the Inside Track "prices only ever go up" nonsense.
Now let's hear what s2r has to say :p
Posted by little professor @ 01:04 AM (1269 views) Add Comment
29 Comments
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1. whiteknight said...
how long has this bubble been going on? the other two went on for reasonably long periods. this one is quite inconvenient though.
2. Montesquieu said...
A friend of mine - a qualified goldsmith who had been doing jewellery repair for a living - gave up his job two years ago to promote and run events in town halls where people could come and trade in gold jewellery essentially for scrap value, as the gold price was heading up then. He had a deal going with someone in the bullion trade to provide him with bulk scrap. He was originally a goldsmith himself and would remove stones etc for re-setting. The beginning of the bubble are at least that old. He found it hard to get the volume he needed and gave it up after a while (although he was taking in a lot of material, his margin wasn't fantastic).
Talking to this guy there has always been a sub-strata of people who kept a proportion of their wealth in gold - krugerands etc, or even big gold chains and rings - very liquid, always saleable quickly by weight if the need arose.
Anyway, now that the sheeple are into gold the smart money may well be getting out soon ....
Personally I think the next bubble is in green-ery - renewable energy/carbon permit trading/green business consultancy, that sort of thing. I've had a few friends in the IT business give up secure jobs recently to join green energy companies, there's a ton of research/seed money from governments in there especially in the US, and if any genuinely new breakthroughs occur in stuff like efficient battery, or cheap fuel cell or solar panel technology, or perhaps even nuclear fusion (as well they might, necessity being the mother of invention) expect markets to go completely mental again just like dot com ...
3. Hardlanding said...
Well the money has to be invested somewhere and gold is traditionally the "safe" place to go when everything else is uncertain including banks, governments and currencies. Surely this is a "good" sign that investors are capitulating until we hit rock bottom?
4. Duncan said...
Areas in which Gold differs it that it is easy to sell on, is appreciated in many countries and can easily be moved between them.
For example the Indians love their Gold jewellry etc (although I have read they aren't buying at current prices).
Another difference is that it can be sold in increments. As people have pointed out you can't sell 1/2 a house. You could easily
sell half of some gold coins.
So yes there might be a bubble but if anything it will develop a slow puncture rather than popping.
Something which would be useful to know is whether people are borrowing to buy gold
or just converting their savings into it.
:- Duncan
5. harold said...
"The goldbugs deserve to get burnt every bit as much as the greedy BTLers who fell for the Inside Track "prices only ever go up" nonsense. "
And they will... eventually. But there seems to be a touch a jealousy here. S2R1 (and others) were encouraging people to invest in gold and silver well before this latest price advance. Had this advice been heeded, this apparent bitterness might now have been avoided.
little professor, before you cry "top", can I encourage you to read:
http://www.kitco.com/ind/Turk/turk_feb252008.html
6. Jonb said...
Nobody can say exactly where the top will be. Yes, they probably will rise further before they crash, but investing on the "greater fool" basis is not a good way to secure your money.
7. cornishman said...
It's true that there is a lot of speculative froth contained within the gold market at the moment, but for good reason IMO.
The dollar is on its way out as a reserve currency. The whole idea of a reserve fiat currency only works with one dominant world superpower. Gold has always been money and will become part or all of a new currency structure as Asia/China/Russia etc become more economically powerful than the US, . The price will be volatile in the short run, but in the long run - it will only appear to go up. But what is really happening is that it is the fiat currencies which are going down at various breakneck speeds. It is the value of gold that is stable - not the fiat currency. Anyone believing that we will all simply go back to how things have been for the last 30 or 40 years is going to be disappointed, I reckon. It is the fiat currencies in those years that have been the aberration - not gold.
There is talk now of the US taxpayer bailing out the recent excesses of the financial companies. The US taxpayer is already up sh*t creek with falling living standards, unfunded pension comittments for all the baby boomers, unfunded welfare comittments for all the war-wounded. If the taxpayer takes on all the over-exuberence of the last few years as well - just what is going to encourage 'growth' in the US?
8. happyrenterz said...
little professor is there any investment that you support? If you save cash the banks use it for their dodgy deals? Keep cash under your mattress?
9. Jb1970 said...
You got to put your savings somewhere, banks and the interest payed by them ain't doing it for me.
10. cornishman said...
spelling - 'commitment' - not 'comittment'. Didn't think it looked right.
11. planning4acrash said...
Gold is different to houses because it can be traded in a second electronically. It will probably double again as depression sets in. It did in 1930's. I've avoided trading because don't have internet at work. Am getting a blackberry.
12. planning4acrash said...
And you need a portfolio. At the moment, gold, silver, agriculture, pharmaceuticals, Yen, yuan, aus dollar can all be used to spread risk.
13. Debtfree said...
happy days. especially when you started buying at $375 an oz. :o)
the reason for holding gold 'Professor', is to protect against the financial mess that cheap money and the banks have created.
to put goldbugs in the same category as BTL parasites is completely off the mark and wrong.
14. Faustus said...
I think L.P. is right in thinking alot of this ramp up in gold price increase is simply 'hot' speculator money looking for a home now that other asset prices are on the wane and not some early indicator of an imminent apocalyptic collapse of global capitalism which lets face it some on this site [bizarrely] seem to yearn for ('the politics of envy' anyone? How about sticking to just wanting a house price correction without revolution or some other twaddle?). In the Telegraph online today they report rumours of central bank intervention to prop up the plumetting dollar (presumably by purchasing truckloads of greenbacks?) and shake out the speculators and looking at recent history intervention looks fairly probable so before the gold bugs get too cocky they'd better watch out. I have to confess I'm a loser in all of this since I sold out of gold before August whilst things were looking a little 'peaky' but you win, some you lose some and like most on this site making money is great but losing it isn't when you are trying to put together a deposit for what will likely be in 2-3 years still very elevated house prices relative to their values 10 years ago (which would require something like a 50-60% fall and I've got news for you..... that ain't gonna happen period).
15. uncle chris said...
Whatever happened to good old hard work and saving. I know we may not make a quick fortune, but to me gold just smacks of another speculative bubble at which to gamble. Think I'll stick with our lowly 6% per annum and wish you speculators well in your wagers.
16. stillthinking said...
There has certainly been a lot of advice to buy gold that I can remember.
However, nothing more than speculating because if the US can't reinflate, and thats what this is really, then gold is suddenly held up by nothing. The attempt looks ever more desperate and soon the last shot is gone, suddenly cash is king but you are stuck with Ratners. Head off to another currency seems a safer proposition.
17. sold 2 rent 1 said...
little professor,
I have always said gold will be a bubble, and by 2011 it may be the bubble to end all bubbles
CNN pumping gold tips to joe public (as we enter an Elliott wave 5 super spike) is yet another crime the power elite are committing on the masses.
The power elite are already heavily invested in gold and will sell out at the peak of 1300-1500 in May/June.
They will then probably buy back 3 months later after a hard correction.
Cornishman,
"Gold has always been money"
This is not strictly true. Gold came into use about 5000 years ago. There is no reason to believe that it will continue in use for infinity. In fact that is highly unlikely. IMHO gold will be worthless in the end, but it may be the last thing to become worhless.
18. inbreda said...
"to me gold just smacks of another speculative bubble at which to gamble"
IMO it is the only store of wealth. If you work hard, earn pounds, and put them under your mattress, the government will steal them. If you put it in gold the government can't. If it is in a speculative bubble it is a shame as it should just be a store of wealth and nothing more. IMO though, it has been undervalued, and still has a long way to go to be valued correctly. I also don't agree with little professor: "goldbugs deserve to get burnt every bit as much as the greedy BTLers", because the greedy BTLers have prevented an entire generation from getting on with their lives (to a certain extent, by pushing the price of what could have been a home out of FTB reach). Gold does not have this anti-social aspect. If people want to 'gamble' on gold then let them - it won't do anyone else any harm.
19. uncle chris said...
S2R .... food and water will never be worthless.
20. sold 2 rent 1 said...
stillthinking,
"if the US can't reinflate, and thats what this is really, then gold is suddenly held up by nothing"
You are assuming that gold only works well in inflation. It may work well in deflation too.
It is becoming more likely that the US consumer will not be taking on any more debt voluntarily and a Japanese style deflation lays ahead.
This will cause the banks to fail as debt implodes. As banks fail, everyone will attempt to withraw deposits making the problem worse.
The US government has no choice but to have a forced reflation strategy where banks are bailed out at taxpayers expense. The helicopter Ben reality is almost upon us. If this doesn't cause inflation then give everybody $10,000 in their current account. That should do it. If it doesn't then make in $100,000
If for some strange reason the US lets most of its banks fail then gold will become the primary currency. It is not actually that difficult for a company like bullionvault to allow its customers to electronically pay each other online. We are pretty much a cashless society anyway.
The future is in the balance. It could go either way.
21. cornishman said...
Radical thought. Anyone with wodges of cash to worry about could always buy a house if they think that their currency or gold won't hold value! You can always live in it or swap the ability to live in it for whatever currency is flavour of the month at the time by renting it out. What can you actually do with a lump of gold?
What all of this boils down to in the end is playing the markets as things constantly readjust. There will be winners and losers - as always.
22. sold 2 rent 1 said...
uncle chris,
"S2R .... food and water will never be worthless."
Well I have to answer this one. Let's talk about futuristic ideas of nanotechnology, fabricators, and free energy.
Nanotechnology is the ability to inexpensively arrange atoms in most of the ways permitted by physical law
Fabricators are machines that use the nanotechnology to produce objects (could include food and water)
Free energy exists but we just haven't figured out how to harness it yet.
If these 3 concepts could be made to work together then how powerful would that be.
See website
http://crnano.org/assemblers.htm
But surely these ideas are a 1,000 years away. If evolution is exponential and we are about to go vertical, there is another revolution on the same scale as the internet or industrial revolution, but built on top of the internet, that could play out in less than a year.
If someone built a fabricator that had an output of another fabricator (ie duplicate itself) then food and water could be free for everyone.
The point I am making is that the "moment of singularity" could produce the most remarkable outcomes.
The final cycle of consciousness is about co-creation. With the "$100 laptop" now in production, what would 6 billion people all working together be able to produce. These 6 billion people would also be free from the power elite that have been holding them back from reaching their true potential.
23. Sharpe said...
virtually no one in the general public is buying gold - mention it to your mum or your work colleges, they will probably think you are mad.
a long way to go to the peak - a lot of people are saying $2500 - but when your mum is getting into it, that might be the time to get out.
Jim Rogers thought that gold would still go up, but not as fast as other commodities, like softs and grains.
24. harold said...
"Nanotechnology is the ability to inexpensively arrange atoms in most of the ways permitted by physical law"
True, but unfortunately the "inexpensive" bit is still not at all a reality.
For anyone interested in the future role of gold in society, can I recommend?:
http://www.amazon.com/gp/product/0470047666/104-1082534-5481535?ie=UTF8&tag=dollarcollaps-20&linkCode=xm2&camp=1789&creativeASIN=0470047666
Nathan Lewis, "Gold: The Once and Future Money"
"the power elite are already heavily invested in gold"
Yep, who do you think bought most of OUR gold that Brown so kindly sold at market bottom in 2000?
25. p. doff said...
I remember watching Tomorrows World as a youngster. It was a programme full of hope and exciting things to come. There was going to be virtually free energy when nuclear fusion was mastered (or better still total mass to energy conversion); we were all going to have too much free time as computers and robots would do everything for us. The moon would be colonised and Mars would be next. Warp drive might become a reality. Medical science was going to make illness a thing of the past. Wars would be unnecessary.
All these years later, we are wondering what to do with nuclear waste; coal fired power stations are being built like there's no tomorrow (China). People are spending more hours at work than ever before (going cross-eyed tapping on computer keyboards) - wives work out of necessity to help pay the mortgage. Man on the moon is a history adventure. Hospitals are now a great place to pick up some superbug thats likely to kill you. We have developed better ways of killing more people more efficiently.
I don't know about the next cycle of consciousness, but I know the internet now provides a source of silly predictions that are swallowed by the gullible (much as I wanted to believe in Tomorrows World).
It would have been nice not to have not developed cynicism over the years, but life does that top most rational people Perhaps I should adopt some religion afterall.
26. fahrenheit451 said...
Quite right P4C.
Beware the risk of bubbles just the same, if it takes ages to buy & sell, the crash looks like a soft landing, but it isn't ->>> GBH and my little Darling *** Take Note *** !!!
The gold will fall and re-set itself "shortly", probably when China & others start to sell ...
The trick is not waiting for the UK stock markets to wake up, but keep a check on Japan, Hong Kong, and Taiwan - and move quick before Wall Street get the news.
Good luck, I prefer not to trade on the Stock Markets as I have enough elsewhere, sorry but that would be telling ... But its all one big "melting pot" (pun) anyway and what goes around, comes around ... but sometimes they don't admit it ... just "read between the lines", crystal ball's a bit misty at the moment.
27. Crashwatcher said...
As far as I'm concerned people are welcome to buy as much gold as they like - you cant eat it and you cant live in it - the rest of us can quite happily go without it so who cares how much it costs or whether theres a bubble or not. House prices though affect the quality of life for ordinary people.
28. quiet guy said...
@S2R1
"If someone built a fabricator that had an output of another fabricator (ie duplicate itself) then food and water could be free for everyone."
Nanotechnology is interesting but current applications are a LONG way from producing self assembling systems etc. I don't expect to see anything like that in my lifetime.
Speaking as one who enjoys Sci-Fi, I say by all means aspire for greater things in the future but also plan for today's problems with today's technologies.
29. Slysmiles said...
There seems to be a consfusion about gold investment. A lot of people are buying gold, not because they think there is a lot of money to be made, but simply to protect the money they already possess. High inflation, falling stock markets, falling currencies are the key factors. I just want to hold my wealth, and gold is ideal for that. Speculators might get burnt, but thats another aside. Keeping my money in a bank account at 6% with inflation at 4%+ and currency falling 4% is losing 2% a year, in my mind unacceptable. Investing in the stock market is not investment, it's a gamble. There really is NOTHING left apart from precious metals for protecting ourselves if stagflation/inflation or depression take hold. The storms brewing are not a joke, take shelter.