Wednesday, Jun 17, 2009
Are we now nearing bubble territory?
Telegraph: Gold sold like chocolate from German vending machines
TG-Gold-Super-Markt aims to introduce the machines at 500 locations including train stations and airports in Germany.
The company, based near Stuttgart, hopes to tap into the increasing interest in buying gold following disillusionment in other investments due to the economic downturn.
Posted by flintster1994 @ 08:28 AM (1239 views) Add Comment
22 Comments
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1. alan said...
Will they sell that many krugers/bars at "30% over market price"?
If they are installing the machines in London, they should be sure to attach it firmly to the wall.....
2. Bear said...
The benefit is, that you can get a gram of gold, you can't get that in a coin shop
3. charlie brooker said...
This company was advertising in the early hours on British TV : www.cashmygold.co.uk
I wondered if anyone else had seen the ad?
4. uncle tom said...
30% over the market rate? - are people really that dumb...
5. happy mondays said...
30% over the market rate? - are people really that dumb...YES ! Look at how much debt they will get into to buy a house that is at least 50% overvalued..Numbed,brainwashed,blinkered,hypnotised by greed or fear, or just plain F**king Stupid. Who know's!
6. refusetobuy said...
Not worth it's own thread - http://business.timesonline.co.uk/tol/business/columnists/article6513633.ece
A couple of frankly wacky modern artists will be on the streets of the City handing out free gold today. Yes, that got your attention. Swiss Enrico Centonze and his German counterpart Anke Trojan have spent £150 on gold leaf, which they are putting in about 60 bowls of soup that will be handed out to passers-by.
Centonze, who was in the City yesterday pacing out the route when I spoke to him, says that the event is somewhere between an “intervention” and an “action” and is designed to make bankers think about the true value of gold. “The idea behind it is to make people estimate gold and realise gold is of limited value,” he said.
7. hpwatcher said...
Are we now nearing [gold] bubble territory?
The answer, simply put, is no.
Two classic characteristics of bubbles are a feverish mass-buy in - which hasn't happened in gold - and a rise far greater than anyone expects, which is [currently] not happening. Compare the gold charts with the housing charts, there is no clearly defined summit. Don't let your experience with the housing bubble, frame your view of what is happening with gold. Moreover, at present, it looks like the housing bubble is still yet to really burst in any major way.
The housing bubble stil hasn't really burst.......
8. the number cruncher said...
Is housepricecrash about to turn to goldpricecrash in a few years time
sounds to me like many of the commentators here have thier own vested interests
9. uncle tom said...
"Is housepricecrash about to turn to goldpricecrash"
It's getting that way..!
The downside risks to gold seem rather greater than the upside possibilities, but I'm not forecasting an impending collapse (although that is not impossible)
There are much safer havens for your wealth..
10. denzil said...
Gold sold like chocolate. Sound like Aero to me. i.e bubble like.
11. 51ck-6-51x said...
hpwatcher said, "and a rise far greater than anyone expects"
- false, in a [mania] bubble many people expect the price to continue to go up when the price is about to hit its peak (and often still do after the pop).
A bubble, even though usually defined in terms of herd mentality & +ve feedback is not reliant on such a phenomena - a strict definition of a bubble isthat time in which a price is above it's fundamental value over and above the time to close arbitrage opportunities - and is therefore possible in other scenarios (however unusual or unnoticed).
...of course it is much harder to classify periods of time as fitting the strict bubble definition than the mania subset, but the information of the strict definition gives us, among other things, an idea of the propensity for bubbles in different markets - asset inhomogeneity would be one factor that would increase the likelihood of bubbles, e.g. Housing, since it clouds the fundamental value of the asset, and liquidity varies across the market.
A bubble in gold is indeed most likely due to mania or the popularity of a skewed fundamental analysis.
12. george monsoon said...
Ok, people will be looking for a better return on their savings.. currently interest rates are extremely low and if the media starts to publish this kind of material en-mass then YES there will be a bubble, because people (as a whole) are unaware of alternative investment opportunities.
I am investing in tins of corned beef and baked beans. Shelf life of about 10 years.. roughly how long it will take before food is being exchanged as currency.
13. hpwatcher said...
hpwatcher said, "and a rise far greater than anyone expects" - false, in a [mania] bubble many people expect the price to continue to go up when the price is about to hit its peak (and often still do after the pop).
and a rise far greater than anyone expects.....before it pops, of course.
14. uncle tom said...
666,
A good saying about bubbles maintains that they do not burst when sane rational people believe they should; they burst when sane rational people no longer believe there is a bubble.
That has certainly come true on the property front.
The current gold price, when seen in an inflation adjusted context, looks a little bit high by long term historical standards, but not in bubble territory.
However, if you make further adjustment for the decline of gold's social and financial significance, and anticipate the possibility of a western central banks offloading reserves that theyt no longer need, you realise that there is a significant possibility that the lows reached a decade ago were closer to a normal price than an exceptionally low one.
This would put the current price in bubble territory, with an attendant risk that the price might plummet in very short order.
Don't forget that in the early 80's, the price dropped from $850 to $300 in little more than two years - not what you want to see from a 'safe' investment..
15. Investmentpropertyrumours said...
The fact of the matter remains, whilst there might not be a perceivable maximum price that gold can reach, there is a fixed low that it can. The low last time was about $250usd an ounce. As it hit that price, the mines closed because they became too inefficient to run. The other fact is that actual gold, and "paper" gold are two entirely different things. It isn't physically possible for everyone to take possession of gold at the same time, the physical side is short several hundred thousand times. People in the business are aware of this, the average layman however is not. The media and it's hype being the way it is, and sheep being sheep, as artificial supply, demand and hype goes on, price goes up. Bad news, price goes down. Get on the short, the down has further to go than any up!
16. george monsoon said...
I sometimes get the feeling that my comments are ignored because of my fundamental lack of understanding, in particular to the workings of commerce and the technical jargon therein.
Although It would be nice to get some feedback from you guys, even if you feel like you are "dumming it down" for my mere 140 ish IQ
:)
17. Sem said...
uncle tom: and anticipate the possibility of a western central banks offloading reserves that theyt no longer need..
but they do need.
18. uncle tom said...
As it happens George, I have for many years kept a small and inexpensive stash of basic foodstuffs in my attic (including baked beans) after realising just how vulnerable the distribution of food had become to 'black swan' type events.
There are virtually no stockpiles of food in this country, and we are dependant on supplies from far flung corners of the globe. Supermarkets only carry a day or two of stock. Most households carry only about a week's supply.
£50 worth of cheap tinned basics can keep someone alive for a month - a good one-off insurance against an event that may never happen - but might - bit like fire insurance.
I recently extracted a tin of beans - circa 1997 vintage - and found the contents fine, although the tin is beginning to corrode a little.
19. quiet guy said...
@George Monsoon
"if the media starts to publish this kind of material en-mass then YES there will be a bubble"
I'm guessing that media gold hype won't take off because gold is still a relatively rare investment in this country. If the editorial staff for The Times decide to buy a load then that may change of course!
20. denzil said...
@George Monsoon.
The following link is worth a read regarding our perilous food supplies.
http://www.neweconomics.org/gen/uploads/55ksx4awtkarwz55oc4tek5526112008122020.pdf
21. p. doff said...
Where is S2R1 these days? This topic always used to tempt him to put finger to keyboard with a few predictions.
22. 51ck-6-51x said...
UT - Nice saying :)
However, regarding your point about 'bubble territory':
- I think that a historical price bears no information on any future price; only the current price has any relevance (very 'Zen', eh?!) - once the price has changed it is only that new price that holds any information, not what it was or indeed how it got there. That is to say that I believe that the price is a Martingale, albeit a different Martingale to an equity's price (which one can empirically observe since the volatility of gold is not proportional to the price, as it is with equities).
- Hence, I do not adhere to the idea that 'bubble territory' may be inferred from past prices, only external factors (supply & demand) and the current price.
- *phew* a little heavy but I think it sums up my thoughts on that small, but pivotal point.
Note that I do agree with your analysis, however!